The Black Farmers Association of South Africa (BFASA) has welcomed findings by the Competition Commission recommending that large players in the fruit and vegetable production value chain should open up the industry to black farmers, saying this would have a transformative effect on the industry.
This week the commission published the findings of its inquiry into the fresh produce market, which found that black or historically disadvantaged persons (HDP) and small and medium enterprises (SME) farmers find it difficult to sell their produce in national food produce markets (NFPMs), despite these being the least costly route.
It has been estimated that less than 1% of the gross value of sales in the NFPMs comes from smallholder or black SME farmers. The NFPM ecosystem consists of different stakeholders tasked with various roles in moving produce through the markets. They include farmers, market agents, product control regulators for agriculture and the Agricultural Produce Agents Council.
The black SMEs also find it difficult to enter and grow in the NFPMs. “Where entry occurs, this is limited and the survival rate is low,” said deputy commissioner of the Competition Commission Hardin Ratshisusu.
“The findings will go a long way to relieve the stressful situations black farmers find themselves in — it’s a step in the right direction, yet more needs to be done,” said BFASA president Lennox Mtshagi.
The commission found that barriers to entry in the value chain, especially at the farming level, constitute a plague of problems
He said the entire value chain is monopolised by big commercial farmers and black farmers are “far from benefiting”, especially in aspects such as storage facilities. Moreover black farmers lack access to land, water rights and financial support. Some potential partners did not honour off-take agreements, “despite having major retailers in the townships benefiting... and that money going out without being re-invested in those areas”.
“It will make a huge impact calling on those with resources to support black farmers. I wish they could push some more,” he said.
The commission investigated the apple, citrus (particularly oranges and soft citrus), banana, pear and table grape sectors. In the vegetable sector it looked into potatoes, onions, carrots, cabbage, tomatoes and spinach, as it had reason to believe that there may be features in the fresh produce market that impede, restrict or distort competition.
The size of the domestic fresh produce market is estimated at more than R53bn — about R21bn for products sold through national fresh produce markets and R32bn through formal retail. This figure excludes export, direct sales and farm-gate sales.
The commission found that barriers to entry in the value chain, especially at the farming level, constitute a plague of problems. Access to finance remains one of the most important elements to successful participation in farming. The inquiry found there was an interdependence between access to finance and access to water as some loans were declined solely on the basis that the farmer did not have access to water rights. The department of water appeared to be fast tracking its application process to cater for the demand.
The commission found that delays in the implementation of the blended finance scheme disproportionately affected SME and HDP farmers.
It recommended that the department of agriculture, land reform and rural development, the Land Bank and commercial banks should work jointly to fast track and accelerate the implementation of the scheme. “This blended finance scheme should also cater for costs of an agricultural project’s feasibility studies, including water licensing and acquisition of land,” it said.
Ratshisusu said as part of the recommendations, NFPMs should set targets to increase annual sales from small-scale and HDP farmers. “These targets should be a minimum of 10% increase annually in sales from SME and HDP farmers combined,” he said.
NFPMs, including established farmers, should also put in place a programme for the introduction of new HDP market agents (where there are none) and ensuring that the disadvantaged market agents have access to highly-traded produce — potatoes, onions, tomatoes, and bananas — and also implement skills training.
On the retail side, the commission said the pricing of fresh produce sold by retailers lacks transparency as prices are not presented to consumers with adequate unit pricing (on a per kilogram or gram basis) and this makes it difficult for consumers to compare prices in-store and across different retailers.
“It is important that this concern be remedied as this will allow consumers to compare pricing of differentiated products in-store and across the retailers,” said Ratshisusu.
In response to Business Times' questions, Shoprite said: “Where possible, the per kilogram price of fresh produce sold in supermarkets is already displayed on the PI (Product Indicator) labels.”
Pick n Pay said: “The vast majority of products in our stores already show the price per kilogram or unit on the shelf label. We are currently reviewing the process to roll this out to all fresh produce items to reflect per kilogram or per gram pricing on all items.”
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