The Competition Commission of South Africa calls it a “large-scale or nothing” dynamic in Mzansi’s fresh produce industry. That is why it is launching a probe into the fresh produce value chain and “market features which impede, distort or restrict competitiveness”. And the farmers who welcome it most are the ones singled out by die commission itself: small-scale growers and black farmers trying to upscale.
African Farmers’ Association of South Africa (Afasa) youth chairperson in Gauteng, Katlego Kgopotse, says that fresh produce markets are robbing small-scale farmers or their hard-earned income and delaying growth and job creation.
The 21 national fresh produce markets across the country are a key point to be investigated.
In its gazetted notice on the inquiry, published on 25 March this year, the commission says that it will put the price-setting mechanisms and the role of agents under the microscope, along with the information-liquidity-pricing dynamic, price dispersion across different markets nationally, market and agent fee determination, and onward logistics and logistics fees, including any price discrimination.
“Fresh produce markets are ripping off black farmers,” says Kgopotse, who feels that small-scale farmers are robbed of their profits. “After supplying the market they still have to cover their operational costs but the saddest part is that, with the 15% [fee] that is being taken away from them, they are unable to cover all their costs. They are working on a loss.
“What we want to see coming out of this inquiry is [fee] percentages to be reduced. We also want to have our own fresh market, owned by farmers, for the farmers.”
Kgopotse is convinced that the high percentages in fees have a direct impact on farmer profitability. In the end they cannot afford a next round of inputs, and job creation suffers in the very communities they are trying to feed.
‘Even the market path is narrowing’
To add insult to injury, the fresh produce markets themselves are on a slow decline and further narrowing small-scale farmers’ options, according to RSA Group CEO Jaco Oosthuizen.
He says that, even though local municipalities earn significant commission revenues from farmers on market sales, they had failed to reinvest in the maintenance of South Africa’s fresh produce markets.
“Large-scale commercial farmers have a range of sales channels to explore, including direct relationships with retailers, but small and emerging farmers require an effective enabling environment to access customers.
“South Africa’s fresh produce markets have historically provided this, but as they degrade, the range of options for smaller farmers is narrowing, while the cost of getting their produce to buyers is increasing.”
Oosthuizen would like to see a plan of action on how challenges affecting farmers who produce for the markets are going to be dealt with. “We would like to see a clear, deliverable action plan to fix the markets and radically improve surrounding infrastructure such as road, rail, electricity supply and ports.”
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Probe to stretch across the value chain
The probe will not only focus on produce markets, however. Competition Commission spokesperson Sipho Ngwema says that it will zoom in on issues at each layer of the value chain, and will be conducted under four main themes:
- Efficiency of the value chain: National produce markets but also other market contracting, fees and mark-ups will be looked at under this theme.
- Market dynamics and the impact of key inputs for growers: This will cover the costs of all inputs for farmers, as well as market structures, high concentration and intellectual property as drivers of cost increases. The commission will also take a look at the role of intermediaries and distributors in the provision of seeds, price discrimination, and a lack of public-sector supply of inputs such as open seed varieties.
- Small and historically disadvantaged growers: The commission will look at funding markets and financial support for small-scale producers and previously disadvantages persons, along with input support, market access, price discrimination, buyer power, space and access to land.
- Barriers to entry in relation to the regulatory environment: The commission will assess the current regulatory environment and identifying areas where regulation may be needed to improve competitiveness.
In speaking about small-scale and black farmers, the commission recognises its important role in countering food insecurity. It therefore wants to probe “the existing ‘large-scale or nothing’ dynamic in food chains [that] may serve to limit the scope for small-scale participation in farming”.
“Where applicable, the market inquiry will draw on specific case studies relating to small and/or historically disadvantaged growers, specifically relating to growing of the most common fresh produce such as potatoes, onions, tomatoes, and cabbage,” the commission’s notice further reads.
Saamtrek Saamwerk Northern Cape coordinator Sehularo Sehularo says that the inquiry is long overdue. “Truth of the matter is that we need each other. All of us need to work together for growth and not frustrate each other. It’s a small cake we all need to eat from.”
The Competition Commission will conduct its inquiry over a period of 18 months. It is inviting public comments on the scope of the inquiry, which needs to be submitted by 25 April 2022. Comments can be submitted at ccsa@compcom.co.za.
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