The Competition Commission has launched a public market inquiry into the fresh produce market to probe where there are any features in its value chain which lessen, prevent, or distort the competitiveness of the sector.
The Commission said on Monday that the inquiry was necessary because of the importance of the sector for economic growth and employment, and the nutrition and welfare of citizens.
The terms of reference of the Fresh Produce Market Inquiry, established in terms of Chapter 4A of the Competition Act No. 89 of 1998 (as amended) (the Act), were published in the Government Gazette No. 46093 on March 25, 2022. A market inquiry is a general investigation into the state, nature, and form of competition in a market, rather than a narrow investigation of specific conduct by any particular firm.
“The Commission is of the view that the Fresh Produce Market Inquiry is essential in order to understand the state of competition within the industry, the market features affecting price outcomes, and the challenges currently faced by farmers, especially small-scale and emerging farmers,” the Commission said.
“Agriculture plays a significant role in the South African economy as it contributes to food production, job creation, raw material supply to agro-industrial and manufacturing sectors, as well as export-driven foreign exchange income. The Commission has prioritised the food and agro-processing sector since 2008 due to the sector being a source of staple food and the potential of the sector to create significant employment opportunities.”
The inquiry will focus on particular issues at each layer of the value chain.
“Specifically, the scope of the Fresh Produce Market Inquiry will cover aspects from the sale of fresh produce by the farmer to the customer - the retailer, processor, or export market. The interaction of retailers and end consumers will not be considered as this was previously covered by the Grocery and Retail Market Inquiry. The sale and distribution of processed products by food processors will also be excluded from the inquiry,” The Commission said.
It has identified four broad themes for the inquiry, covering features that may impede, restrict, or distort competition and market outcomes. These include:
· Efficiency of value chain. This theme is focused on determining how the value chain and differing levels of concentration at various levels and route to market impact prices and efficiency, with a focus on the fresh produce market.
· Market dynamics and impact of key inputs for growers. The key inputs for growers include seeds, fertilisers, agrochemicals and farm equipment. Many of these inputs are imported or priced based on international bases and can lead to significant cost effects at the grower. This theme is focused on the upper end of the production value chain.
· Small and HDP growers and participation. This theme centres on the lower end of the production value chain. Specifically, the inquiry will consider the barriers to entry specifically facing small and HDP growers, and issues around access to fresh produce markets or retailers through contract farming
· Barriers to entry in relation to the regulatory environment. This theme would focus on the broader regulatory environment which prevails in the fresh produce industry.
The public and/or any interested party has been invited to comment on the proposed terms of reference on/before April 22, 2022. Comments can be submitted to ccsa@compcom.co.za.
