Shopping centre landlords have already reshaped their tenant mixes before the end-December deadline to end grocery exclusivity, as the Competition Commission moves to dismantle a practice that has restricted competition for retail space.
From January, grocery retailers will no longer be allowed to negotiate or enter into new exclusive lease agreements, marking a further step towards opening up shopping centres to greater competition.
The phase-out stems from the commission’s grocery retail market inquiry (GRMI), published in December 2019, and has been implemented through separate consent agreements with big retailers including Shoprite, Pick n Pay and Spar.
The agreements were negotiated between the commission and the retailers, then confirmed as orders by the Competition Tribunal, making their commitments legally binding.
Under the agreements, retailers were required to stop enforcing exclusivity clauses against small and medium-sized enterprises (SMEs) and grocery stores owned by historically disadvantaged people, with immediate effect. Existing exclusivity arrangements could not be renewed, and all remaining provisions were to be terminated by the end- December.
Competition Commission spokesperson Siyabulela Makunga confirmed to Business Day that all exclusive leases have to be terminated by year-end, and none will be allowed to remain in place.
Makunga said the exclusivity restrictions apply only to Shoprite, Pick n Pay and Spar in the grocery market, as Woolworths and Food Lover’s Market had no exclusive leases.
“It affects all landlords with grocery exclusivity clauses, though many wanted them scrapped anyway,” he said.
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SA Property Owners Association CEO Neil Gopal said competition for retail floor space remains intense, and the lack of available space is precisely because the market is competitive, rather than because of any market feature restricting competition.
“Despite the removal of exclusivity clauses, formal retailers typically sign long-term leases, meaning shopping centres can remain fully occupied for extended periods before vacancies arise,” Gopal said.
He said that though shopping centres aim to offer a wide range of retailers and services, smaller businesses may opt for cheaper premises elsewhere, particularly in urban areas, to keep operating costs down.
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Growthpoint head of retail asset management Gavin Jones said the change had been a long time coming, with landlords already reshaping tenant mixes and grocery retailers renewing leases without exclusivity clauses for several years.
“The change has created opportunities to introduce a second or third supermarket into larger centres, pairing mainstream grocers with value-focused retailers such as Shoprite and Boxer to serve different customer segments and give shoppers greater choice,” Jones said.
He said the Reit had already introduced additional grocery retailers across its properties, including Checkers FreshX at La Lucia Mall and Shoprite at Watercrest and Bayside malls, with further supermarket additions planned at Festival, Vaal and Brooklyn malls.
“However, not every centre can support multiple supermarkets. Landlords must carefully assess local spending power before expanding their grocery offering,” he said.
Jones said the right-sizing of cinemas, Game, Edgars and others had also freed up space, making a second or third supermarket a practical possibility.
“Removing exclusivity opens shopping centres to smaller butchers, bakeries and independent grocers, broadening tenant diversity and giving shoppers greater choice,” he said.
Flanagan & Gerard Property Group managing director Paul Gerard echoed this, saying the industry had known about the deadline for some time and had been planning accordingly.
“This allows us to curate a shopping centre’s retail mix to better suit the needs of the community it serves,” he said.
Sean Goldsmith, co-founder of international franchise consultancy Groe Global, said ending exclusive leases will open the market to smaller, innovative businesses that have struggled to gain a foothold under the arrangements.
“We understand that landlords like the security, but there must be balance, and I think this is going to help give the little guy a small foothold from which to thrive,” he said.
He said the commission had addressed an important structural barrier, but what happens next will depend on whether South Africa is prepared to tackle the barriers of finance, business development, commercial credibility and access to retail property.
Makunga hinted that the commission could widen its scrutiny, saying its recent “Rural and township economy report” had identified potential exclusive lease arrangements in areas other than grocery retail that it would target in the future.
Business Day
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