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Competition Commission launches inquiry into food prices in South Africa

| Supplier news

The Department of Trade and Industry and Competition has gazetted the terms of reference for a wide-reaching market inquiry related to the fresh produce market in South Africa, including prices.

The inquiry, conducted by the Competition Commission, will investigate market conditions all along the fresh produce supply chain in the country, looking for any indications of uncompetitive behaviour or price fixing.

The process will commence 20 days after the gazette is published – thus at the start of March 2023.

The commission said that the Fresh Produce Market Inquiry (FPMI) will consider if adverse effects are present in the fresh produce value chain arising from any feature or combination of features that impedes, restricts or distorts competition.

It said that concerns around the fresh produce market were raised during the Covid-19 pandemic, with various reports and findings of uncompetitive and unfair pricing in the sector.

A study published by the commission in 2021 also found worrying trends around the concentration and participation of farmers in the South African economy which raised red flags.

“According to studies, there appears to be broad concern over price levels and volatility of pricing for fresh produce in South Africa. The studies show that high prices of fresh produce have a disproportionate effect on the poor and low-income earners who have to spend a greater portion of their income to purchase essential products,” the commission said.

“A fuller understanding of the main drivers of the apparent high prices of fresh produce in South Africa is a critical area that this inquiry may address.”

Regarding price gouging, the commission’s records show that of 1,254 excessive pricing investigations during Covid-19, 713 of them related to basic food and fresh produce.

“This shows the importance of fresh produce, but in the same breath, may show the potential for abusive conduct relating to essential food items where market circumstances change suddenly,” it said.

The commission said that the FPMI is essential to understand the state of competition in the industry, particularly as they relate to price outcomes.

The impact of retailers in the process will also be included, though to curtail the duration of the inquiry, only certain fresh produce items will be investigated.

For the purposes of the FPMI, fresh produce includes products such as fruit and vegetables, whether processed or not.

The main fruits produced and consumed in South Africa include apples, bananas, oranges and other citrus, stone fruit, pears, avocados, grapes and nuts. The main vegetables include potatoes, onions, tomatoes, sweetcorn, carrots and cabbage.

While the terms of reference cover more than just the shelf price of items, the commission will be looking at retailer margins, markups and price determinations in the review.

The final report is expected to be published within 18 months of the inquiry launching, unless an extension is given by the minister in charge.


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