Fresh Produce Market Inquiry Unveils Final Report: Calls for Inclusive Growth, Competition Reforms

The report, which follows a comprehensive analysis and engagement with stakeholders, highlights challenges in the sector and proposes actionable remedies to drive growth, transformation, and fair competition.

The Fresh Produce Market Inquiry, initiated by the Competition Commission of South Africa, has released its highly anticipated final report, revealing critical features within the fresh produce value chain that hinder competition and inclusion. The report, which follows a comprehensive analysis and engagement with stakeholders, highlights challenges in the sector and proposes actionable remedies to drive growth, transformation, and fair competition.

Overview of the Inquiry

Launched on March 31, 2023, the inquiry assessed the fresh produce value chain across three main themes:

1. The efficiency of the value chain, with a focus on municipal fresh produce markets.
2. Market dynamics of key inputs, including their impact on producers.
3. Barriers to entry, expansion, and participation, particularly for historically disadvantaged farmers.

South Africa's fresh produce market, valued at approximately R53 billion annually (excluding informal sales and exports), is a critical component of the nation’s economy and food security. However, the inquiry revealed significant inefficiencies and inequities.

Findings and Challenges in the Fresh Produce Sector

At a media briefing during the report's launch, Deputy Commissioner and chair of the inquiry, Hardin Ratshisusu, emphasized the urgent need to address historical inequities and foster meaningful economic participation. The inquiry specifically examined five fruits—apples, citrus, bananas, pears, and table grapes—and six vegetables—potatoes, onions, carrots, cabbage, tomatoes, and spinach—as staples in South African households.

Six key issues were identified:

1. Inefficient municipal fresh produce markets (NFPMs).
2. Value chain inefficiencies, including high mark-ups in supermarket retailing.
3. The conduct of fresh produce market agents.
4. High input costs, especially for fertilizers and seeds.
5. Regulatory obstacles.
6. Systemic barriers preventing small-scale and historically disadvantaged farmers (HDPs) from entering formal retail channels.

Concerns for Consumers and Farmers

The report highlights that supermarket chains impose high mark-ups, leading to poor transmission of farmgate prices to consumers. While net margins for supermarkets remain slim due to high operational costs, the structure of the value chain indicates inefficiencies.

For farmers, particularly small-scale and HDP producers, the barriers to accessing formal markets and retail channels are substantial. These include high costs, regulatory hurdles, and limited support for innovation and upgrades.

Proposed Remedies and the Path Forward

The inquiry’s final report outlines 31 practical recommendations to address these challenges. Key proposals include:

• Policy reforms to enhance market competition and reduce inefficiencies.
• Support for small-scale and historically disadvantaged farmers, including financial aid and technical assistance.
• Restructuring of the market to lower barriers to entry.
• Investigation of a mandatory code of conduct to ensure fair practices across the fresh produce value chain.
• Promotion of alternative retail models, particularly those that enable local competition and procurement from NFPMs.

The inquiry also recommends leveraging international best practices to create a fair and dynamic market environment tailored to South Africa’s unique context.

Towards Economic Inclusion and Growth

Ratshisusu stressed the broader implications of the findings, stating, “This report is more than a document. It provides rich insights into the domestic fresh produce market and a path towards economic inclusion. It reflects the need to address entrenched challenges and create a market that works for all, from the smallest farmer to the largest retailer, and ultimately for the consumer.”

The Competition Commission considers market inquiries a strategic tool to tackle high market concentration and barriers to entry, fostering economic transformation and growth. The release of this report signifies the Commission's commitment to creating transparent, evidence-based strategies for more inclusive markets.

Access to the Full Report

The complete findings, including all recommendations, are available on the Competition Commission’s website at https://www.compcom.co.za/fresh-produce-market-inquiry-final-report-launch.

This landmark report sets a precedent for addressing systemic challenges in South Africa’s agricultural markets, with the ultimate goal of empowering small-scale farmers, fostering dynamic competition, and benefiting consumers through fairer pricing and improved access to fresh produce.