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Patel gives go-ahead for probe of fairness in retail sector

| Legislation

The Competition Commission is taking aim at the retail sector to see if it enjoys sufficient competition after the authorisation by Economic Development Minister Ebrahim Patel of a market inquiry.

A similar inquiry into the healthcare sector was initiated two years ago and the commission also probed collusive tendering in the construction of the stadiums for the 2010 World Cup.

Mr Patel announced the probe in his budget vote speech to the National Assembly on Tuesday. "It will examine, among others, the tenancy arrangements in shopping malls, the growth of township enterprises (such as) small shops, spaza shops and so on, and it’s intended to ensure that we’ve got a competitive but also inclusive retail sector."

The announcement follows a row over lease exclusivity clauses among some supermarket giants. Last year, Walmart-owned Massmart filed a complaint with the commission saying plans to introduce its fresh food business, Foodcoat Game stores in malls was being stymied by Shoprite and Pick n Pay. Exclusivity provisions in mall lease contracts where big grocers are anchor tenants often block the sale of certain types of food and groceries by other retailers.

Massmart said on Tuesday: "We welcome an inquiry into tenancy arrangements, specifically the impact of lease exclusivity agreements which we consider to be intuitively anticompetitive and which inhibit more inclusive participation in shopping malls."

Pick n Pay executive for strategy and corporate affairs David North said: "We operate in a growing, competitive and dynamic sector which plays a very positive and inclusive role in the South African economy. We are confident that any new investigation will reach this conclusion, and look forward to making our contribution to it."

Mall developers offer exclusivity agreements with anchor tenants in order to attract high-quality businesses and shoppers. A four-year Competition Commission probe of supermarket leases found insufficient evidence of anticompetitive effects, but said lease exclusivity raised barriers to entry into the groceries market.

The inquiry would involve big supermarket chains, grocery stores and small retail outlets, Mr Patel said.

The healthcare inquiry, under the chairmanship of former chief justice Sandile Ngcobo would commence public hearings into the cost of medical care this year, the minister said.

Mr Patel’s budget vote offered details on other projects. He would issue a directive to the International Trade Administration Commission to ensure that tariff changes at the request of industry were accompanied by reciprocal commitments by manufacturers to invest more; create more jobs; and improve their products and productivity.

"To promote inclusive growth and industrialisation, our trade policies have been more supportive of domestic manufacturers," he said

Mr Patel also announced a R23bn boost for the development of black industrialists.

"The funding commitment … forms part of the increased funding that the Industrial Development Corporation (IDC) has made to the economy and region. Over the five years to 2015 the corporation increased its level of funding by almost 57% to R61bn," he said.

"The IDC has earmarked R100bn in the next five years for investment in the key jobs drivers and R200bn of co-funding by its partners was expected, bringing potentially R300bn to the economy."

Democratic Alliance MP Kobus Marais said Mr Patel’s department had received a 27% budget increase while it was failing to carry out its mandate.

Mr Patel might be impressed with the job opportunities created mainly in the public service sector, but these must be compared with those lost, as well as youth unemployment, he said.

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