South African competition commission launches investigation into uncompetitive behavior in food value chain

SOUTH AFRICA – The South African Department of Trade and Industry and Competition has formally launched its investigation into conditions all along the fresh produce supply chain in the country, looking for any indications of uncompetitive behavior or price fixing.

The Competition 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 impede, restrict, or distort competition.

A study published by the commission in 2021 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 commission said.

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.

“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,” the watchdog noted.

In the inquiry, the FPMI will focus on selected fruits and vegetables that are representative of the fresh produce value chain.

The five fruits–apples, citrus, bananas, pears, and table grapes and six vegetables–potatoes, onions, carrots, cabbage, tomatoes, and spinach, account for at least 70% of the production and sale of these products throughout South Africa in a value chain: farmer to a customer–including retailers, processors, and the export market.

“The main objective of the FPMI is to identify features, or combination of features, that inhibit or distort competition and participation in the fresh produce value chain.”

The inquiry will traverse three themes that cover the entire fresh produce value chain; Efficiency of the value chain, with an emphasis on the dynamics around fresh produce market facilities; Market dynamics of key inputs and their impact on producers and barriers to entry, expansion, and participation.

“Where there are competition and/or public interest issues, the FPMI will provide recommendations to foster competition and ensure equitable and meaningful participation in the value chain for the benefit of all stakeholders as well as consumers in the economy,” the commission concluded.

According to Stats SA food and non-alcoholic beverages, inflation rose to 13.6% in February from 13.4% in January.

Food price inflation has not eased along with global trends, largely due to local factors like load shedding and energy costs, which have hit all along the supply chain.

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