By: Denene Erasmus – Business Day

Supermarkets should display fresh produce prices by weight in addition to per unit

Competition authorities want supermarkets to start displaying the per kilogram or gram prices of all fresh fruit and vegetables in stores, in addition to per unit prices.

The Competition Commission on Tuesday said during the launch of a provisional report from its fresh produce market inquiry that this would make it easier for consumers to compare prices between retailers to make sure they get the most value for money.

The commission launched the fresh produce market inquiry in March 2023 to assess whether there were any “adverse effects” in the fresh produce value chain that could impede, restrict or distort competition at wholesale and retail levels.

Presenting the provisional findings, deputy commissioner Hardin Ratshisusu, who chairs the inquiry, said the lack of transparency in unit pricing distorted competition, because consumers were less able to compare prices among retailers.

This should be remedied, the commission said.

“Consumers find it difficult to compare prices offered by different retailers. Right now, they can see unit prices, but for them to work this back and figure out how much a product costs per kilogram is cumbersome,” Ratshisusu said.

The proposed provisional remedial action applies to the five largest retailers: Woolworths, Shoprite, Spar, Food Lover’s Market and Pick n Pay. It states that retailers should ensure that in addition to unit prices on fresh produce they also show per kilogram prices.

Retailers were opposed to this proposal and argued that it would be expensive to implement, Ratshisusu said. But the commission was “not convinced by that argument”.

Markups

The inquiry has not yet reached a conclusion on whether high markups by retailers on certain fresh produce were warranted, he said.

“There are instances where there are high markups across all retailers, and we have engaged retailers on this to try to arrive at a common understanding of their cost measures and whether high markups can be explained by the costs retailers incur. We have not released this information as part of the provisional report, and we will continue to engage retailers to reach finality on this matter.”

Among the conclusions presented as part of a lengthy set of findings and recommendations on national fresh produce markets, the commission said SA’s fresh produce markets were in a “concerning state”.

Though national fresh produce markets generated enough revenue to sustain themselves, profits are not ring-fenced to cater for current and future capital expenditures, according to the commission.

Smallholder and medium-scale farmers found it difficult to sell produce at the fresh produce markets despite that being the least costly route to market. Less than 1% of the gross value of sales at these markets came from smallholder farmers.

Annual targets

The commission recommended that fresh produce markets had to set annual targets to increase sales of produce from smallholder and historically disadvantaged farmers.

“These targets should be a minimum of 10% increase annually in sales,” Ratshisusu said.

The commission found that due to high levels of concentration in the market for market agents operating at the fresh produce markets, it was difficult for new market agents, especially smaller businesses and historically disadvantaged market agents, to enter the industry. These agents often did not have access to the most traded produce at the market.

It recommended that fresh produce markets put in place a programme for the introduction of new historically disadvantaged market agents and ensure they have access to highly traded produce: potatoes, onions, tomatoes and bananas.

The inquiry found “concerning structural linkages” between two of the four dominant market agents, Subtropico Market Agents and RSA Group.

Business person Patrice Motsepe’s African Rainbow Capital is a shareholder in both these companies.

The commission recommended that African Rainbow Capital should divest its shareholding in either Subtropico or RSA Group and that the buyer of the divested shares must be a firm wholly owned or controlled by historically disadvantaged people to ensure such a transition did not dilute the current level of black ownership in these businesses.