The Competition Commission has called for a fundamental reset of SA’s fresh produce value chain, pointing fingers at a wide range of issues including obfuscating pricing practices, and triggering a defensive reaction from industry players.
The commission’s report, released on Monday, almost two years after the inquiry was launched, uncovered “significant barriers to competition”, including poor infrastructure, regulatory obstacles, anticompetitive behaviour by some market agents, and soaring input costs.
It made 31 recommendations, including greater pricing transparency, structural changes to markets, and measures to cut input costs, aimed at improving affordability and competition in the long term.
Greater pricing transparency could make it easier for consumers to find the best value, while reforms to market structures and input costs could help lower prices in the long term, it said.
“We hope that the recommendations set forth by the commission provide a road map for creating a more equitable and inclusive fresh produce market,” said Parks Tau, minister of trade, industry & competition.
Deputy commissioner and chair of the inquiry Hardin Ratshisusu said retailers’ pricing of certain fresh produce revealed instances of high markups of total revenue over what suppliers are paid for some of the selected products.
While the net margins were slim, he noted that this raises concerns within the value chain of commonly consumed fruits and vegetables.
“The implication is that under the current models of modern food retailing, supermarket chains are not efficiently transmitting prices obtained from farmers to consumers for these produce categories. This suggests that competition in the formal retailing of fresh produce is not as healthy as it could be,” Ratshisusu said.
The inquiry also found retailers, including Woolworths, Pick n Pay, and Shoprite Checkers, primarily price fresh produce per unit. These units are not standardised across supermarkets, making it difficult for consumers to compare.
“For instance, units might include 1kg, 1.5kg, 2kg, 3kg, 7kg, or pockets,” states the executive summary. The commission recommended that retailers adopt dual pricing — per unit and per kilogram or gram — to enhance transparency.
The inquiry is the latest intervention in the economy that may spark a debate on the extent of government oversight in traditionally free markets. It also ignited a defensive reaction from some of the biggest names in SA, which cited existing measures and commitment to transparency and quality.
Shoprite and rival Pick n Pay said they already displayed the per-kilogram price of fresh produce, with Shoprite using price indicator labels and Pick n Pay displaying it on shelf labels.
Woolworths did not immediately comment on the report.
The inquiry found that a handful of large market agents and input suppliers dominate the sector, stifling competition and driving up prices.
It highlighted challenges faced by smallholder and historically disadvantaged farmers, inconsistencies in pricing formats, and high costs of fertilisers, seeds, and agrochemicals due to reliance on imports.
Market agent dominance
The inquiry highlighted concerns about large market agents such as RSA Group dominating national fresh produce markets, particularly in Johannesburg and Tshwane. It said the cross-shareholding between RSA Group and Subtropico through African Rainbow Capital (ARC) reduced competition by aligning economic interests.
The commission recommended that ARC sell its stake in either RSA Group or Subtropico to break this structural linkage. Neither RSA nor ARC immediately commented.
The inquiry found that despite the fresh produce market’s annual value exceeding R53bn (excluding informal sales and exports), the participation of historically disadvantaged farmers remained minimal.
These farmers account for about 1% of sales at national fresh produce markets, reflecting systemic barriers rooted in historical inequities and entrenched relationships favouring large commercial players.
“This particular issue is not unique to the fresh produce markets, but resembles a broader challenge of SA’s agriculture,” agriculture economist Wandile Sihlobo said.
“The report correctly recognises that the established stakeholders in agriculture would have to help with skills transfer for new entrants.”
National fresh produce markets, particularly in Johannesburg and Durban, were found to suffer from deteriorating infrastructure, including inadequate cold storage and ripening facilities.
The commission recommended that municipalities, in collaboration with the SA Local Government Association and the SA Union of Food Markets, change the operating and governance models of the fresh produce markets they own or operate, and ring-fence profits to fund infrastructure improvements.
The report highlighted SA’s heavy reliance on imported fertilisers, seeds, and agrochemicals, which exposes the fresh produce supply chain to global price and supply fluctuations, increasing market uncertainty.
The commission recommends local initiatives, including support for local seed production, to reduce dependency on imported seeds and mitigate inflated prices.
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