SOUTH AFRICA – The Competition Commission South Africa (CCSA) has published the Fresh Produce Market Inquiry Terms of Reference, announcing its intention to conduct a market inquiry into the Fresh Produce Market of South Africa.
The market inquiry will start at least 20 business days after the Terms of Reference are published (ToR) and the final report will be published 18 months after the inquiry’s start.
The fresh produce and agro-processing industries in South Africa have alarming levels of concentration, according to research on market concentrations undertaken by the Commission in November 2021.
Mordor Intelligence projects that the country’s fruits and vegetables market will register a CAGR of 6.9% during the 2022-2027 forecast period.
The Commission stated in its analysis that the challenges small-scale farmers have in achieving economies of scale to lower costs and sustain profitability may be the cause of the dramatic reduction in the number of commercial farms.
The Commission has prioritized the food and agro-processing sector in its Prioritization Framework since 2008, taking into account the crucial role that agriculture plays in the South African economy, including its contribution to food production and security, the creation of jobs, and the supply of raw materials to the agro-industrial and manufacturing sectors.
According to the Commission, a market inquiry is necessary to comprehend the level of industry rivalry, market characteristics that influence price outcomes, the challenges farmers encounter, and the sector’s significance for the economy, employment, as well as the welfare and health of individuals.
The inquiry will concentrate on figuring out whether any market barriers limit or skew competition and market outcomes.
It will emphasize specific and auxiliary issues at every level of the value chain, starting with the farmer’s sale of fresh fruit to the consumer.
Following feedback from the general public and other stakeholders, the investigation will take into account interactions with retailers and, to some extent, end users.
Market inquiry to focus on three broad themes
The Commission has stated that the investigation would only focus on specific fresh produce products but is yet to release a list of these products.
It has also established three major issues for the inquiry, which will address the barriers to competition and market outcomes.
The first is the effectiveness of the value chain, with a focus on the dynamics surrounding the facilities at fresh produce markets. This issue stems from concerns raised by market participants that the National Fresh Produce Markets’ value chain is ineffective and uncompetitive.
The second area of interest is the characteristics of the market for essential inputs and how they affect producers, namely the existence of price discrimination, buyer power, and exclusivity.
In addition, the Commission will take into account the obstacles to market expansion, participation, and the entrance of fresh products.
Small, medium, and microenterprises (SMMEs) and companies run or controlled by historically disadvantaged persons (HDPs) will be given special consideration for the obstacles they face.
The third theme will also involve considering pieces of legislation and the conduct of other regulatory or government entities concerning such legislation.
The market inquiry will start upon the release of the final ToR and on a date that the Commission will announce.