Durban — An investigation into the country’s R53 billion fresh produce sector has revealed several reasons why consumers have been forced to tighten their belts amid spiralling food prices.
Last week, the Competition Commission released its provisional findings of the Fresh Produce Market Inquiry, following 14 months of gathering evidence, as well as public and in-camera hearings.
They found that high mark-ups, barriers to market entry for small and medium enterprises, inefficiencies in the national fresh products markets, as well as load shedding have all impacted on the consumer’s ability to afford fresh fruit and vegetables.
The Commission’s Head of Communications, Sipho Ngwema, said they launched the inquiry because the Commission had reason to believe that there were features in the fresh produce market value chain which impede and restrict competition.
“It was therefore essential that the Commission understood the state of competition within the industry, the market features affecting price outcomes and the challenges currently faced by farmers, especially black, small-scale and emerging farmers.”
Ngema said the importance of the sector to both the economy and employment, as well as the nutrition and welfare of citizens, lent further weight to the need for the inquiry.
The Commission also found high levels of concentration in the market for market agents and the long-standing historical ties between large producers and large market agents which impedes and restricts competition.
Ngema said there was also evidence of stock reservation/ reserve buying and credit sales/credit buying in Tshwane and Durban markets.
Food systems expert Professor Tafadzwa Mabhaudhi from the London School of Hygiene and Tropical Medicine said the Commission’s report validated several widely held beliefs about the country’s food system.
“In many ways, the report validates and confirms some widely held perceptions and research findings with regard to the dualistic nature of South Africa’s food system whereby you have a large, dominant formal system and a small informal system. The report confirmed barriers to entry for small and medium enterprises, an uneven playground and instances of high mark-ups for fresh produce.”
The Fresh Produce Market Inquiry focused on those fruits and vegetables most commonly used in households across the country. It concentrated on five fruits: apples, citrus (particularly oranges and soft citrus), bananas, pears and table grapes. It also focused on six vegetables: potatoes, onions, carrots, cabbage, tomatoes and spinach.
Mabhaudhi said South Africa experienced growing levels of household food insecurity and malnutrition, and a lot of this could be attributed to the low consumption of fruit and vegetables, which most households found to be expensive.
“The findings on high mark-ups and lack of transparency in pricing mean that food access and affordability, two pillars of food security, were impinged on. Hence, many families would have been unable to access and afford fruit and vegetables, thus limiting their ability to afford healthy diets and lifestyles,” he said.
Mabhaudhi added that there was need for a transdisciplinary policy intervention, aimed at boosting production among smallholder farmers, increasing access to credit and markets, investments in infrastructure to support them and regulation to mitigate barriers to entry and encourage competitiveness.
“As the report notes, the issues are wide-ranging, from issues of seed, fertilisers, etc. This means different departments of government need to work together, and with academics, civil society and farmer groups, to develop, implement and monitor the policy reforms.”
He said this would bode well for consumers as it would improve access and affordability for healthy fruit and produce and improve household food and nutrition security.
According to Ngwema, various retailers said they were forced to invest in diesel generators or solar power installations because of load shedding, and these increased costs were passed on to consumers.
“The costs associated with load shedding are significant and have had an impact on operational costs – not just for retailers, but all players within the value chain. These costs are often not able to be absorbed by the retailers and are passed on to consumers, which has an impact on the rising cost of food,” he said.
Ngwema said the Commission would accept comments and recommendations from stakeholders and the public until mid-July, and a final report would be released in October.
He warned that action would be taken against those who were guilty of wrongdoing.
“The Commission can investigate and prosecute at the Competition Tribunal those that break the law,” Ngwema said.
Sunday Tribune