Focus on fresh produce market impediments

Clara Hansen & Angelo Tzarevski

Baker McKenzie

On February 14, the Competition Commission(commission)published theFresh Produce MarketInquiry Termsof Reference,announcingits intentiontoconduct a market inquiry into the fresh produce market of SA.

Themarket inquirywill commence atleast 20business daysafter thepublication of the terms of reference (ToR).

InNovember 2021,the commission conducted a studyinto marketconcentrations, identifying concerning levels of concentration in SA s freshproduce andagro- processing sectors.During its study, thecommission noted that thesharp declinein the number of commercial farms could be as aresult of the challenges small-scale farmers facein reachingthe economies ofscale to decrease costsand maintain profitability. The commission, noting theessential roleagriculture plays in the South African economy contributing tofood production and security,job creationand raw material supply to agroindustrial and manufacturing sectors has prioritised the food andagro-processing sector inits Prioritisation Framework since 2008.

The commission is of the opinion thatthe market inquiry is essential to understand thestate ofcompetition within theindustry, themarket featureswhich affect price outcomes,the challenges faced byfarmers and the importanceof thesector to boththe economy, employment andthe welfare and health of citizens.

Thefocus oftheinquiry will beon identifying whether thereare any impediments within the markets that restrictor distort competition andmarket outcomes. The inquirywill focus on both particularand ancillary issues at each layer of the valuechain,from thesaleof fresh produceby thefarmer to the customer.

Following public comments and inputs from stakeholders, interactionwith retailers and toa certain extent endconsumers will not be excluded from consideration duringthe inquiry. The commission has announced thatthe inquiry will be limited to certain fresh produce items, a list of which is yet to be published.

The commission has identified threebroad themes for the inquiry, which will address theimpediments to competition andmarket outcomes.The firstis theefficiencyof thevaluechain, withan emphasisonthe dynamics aroundfresh produce marketfacilities. This themeis basedonconcerns raised by stakeholdersin the markets, thatthe valuechain atthelevel oftheNational Fresh ProduceMarkets is inefficient and uncompetitive.

The second area of focus is the market dynamics of key inputs and its impacts on producers, namelythe presence of pricediscrimination, buyer power and exclusivity.

Third, thecommission will consider the barriers to entry, expansionand partici- pation in the fresh produce market. Specificconsideration will be given to the barriers faced bysmall, medium and micro enterprises (SMMEs) and firms owned or controlled byhistorically disadvantaged persons (HDPs). Thethird themewillalso involve consideringpieces of legislation andthe conductof other regulatoryor government entitiesin relationto such legislation.

The marketinquiry will commence afterthe publicationof thefinalToRand ona date to becommunicated by the commission.The final report willbe completed within 18 months after the commencement of the inquiry.