CompCom to launch inquiry into fresh produce market

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FIFI PETERS: Some relief could be on the cards for consumers who are feeling that they are paying an arm and a leg for food right now. And of course, we’re not feeling that way. We are paying an arm and leg for food prices. Just yesterday Statistics South Africa told us that food inflation was at its highest levels in 14 years.

But the Competition Commission says it is now launching an inquiry into the fresh food produce market, which I think is a great thing, especially if you look at the price of certain foods and how that’s increased in the past year. Onions are up almost 50%, maize meal up almost 40%, pizza and ice cream up over 20% in the past year. We’ve Siyabulela Makunga, the head of communications at the Competition Commission, for more on this.

Siyabulela, thanks so much for your time. You guys are launching an inquiry into the fresh produce market. Just tell us why, and why now.

SIYABULELA MAKUNGA: ‘Why’ is the fact that the commission has been monitoring food prices from the start in 2017/2018. Good evening to you, Fifi, and to your listeners. And thank you for having us.

We have done some work also in terms of the concentration report. After [the] work of that, there has been a deepening concentration in the market. Out of this study one of the things that the commission found was that 6.5% of the land available to farmers was actually in the hands of the few, who obviously surprisingly contribute about 87% toward the GDP for agriculture.

Also we recognise that agriculture is an essential sector. It contributes to job creation, to food-security production. But also it is a sector that contributes immensely to the economic growth of this country.

So when we observed that there were inefficiencies – especially when it comes to the price-setting in terms of the value chain, and the national fresh produce market facilities, and the role of the agent in this entire formula of setting the prices, and just really the issues of the challenges that were faced by historically disadvantaged marketing agents in that area, the issues of barriers to entry, as well as just really the cost of input – we were concerned about whether or not there are challenges in terms of price discrimination and the rising cost of inputs, and especially that we had observed that some farmers actually pulled out of the sector.

So these are things that we thought let’s have a holistic investigation, a broad investigation into the value chains, so as to answer your concerns around paying an arm and a leg for essential food products.

FIFI PETERS: Sure. Siya, the reason I ask is because you read a lot of reports on the industry that produces food and makes it and sells it. Everyone tells you that the Russia-Ukraine war increased the price of key inputs like fertilisers, we hear that the Russia-Ukraine war caused a whole lot of [instability] in the market which caused the prices to increase, you hear that the rand weakened and we import quite a lot of our food, and therefore prices are higher. And even load shedding has been [cited] as a factor that has now driven food prices higher. So your initial response suggests that there’s a possibility that some of these factors that are being blamed for pushing food prices higher could possibly not be justified.

SIYABULELA MAKUNGA: Certainly we don’t want to speculate, but we can’t rule out any possibility in terms of the factors that have contributed towards the exponential increase in food prices.

Hence our decision to say we don’t want to deal only with retail prices; we want to investigate the retail chain as a whole. We want to understand the role of a farmer – from farm gate to retail – and how that pricing is determined.

What is the role of a distributor? What is the role of a wholesaler? And, in the cases we are dealing with, the issues of logistics, transportation of the produce, and how these contribute.

So I’m saying the investigation is holistic enough that we are able to get to the bottom of the problem of understanding the pricing formula and mechanism in the entire value chain.

But then again, in doing our work, we ensure that the scope is so wide and open that we also look at what other regulators are doing in addressing the same challenges that are confronted by the farmers from the point of infrastructure support, financial support and [subsidies].

These are things that to us should be clarified through an inquiry because, if you don’t have a study, we would all rely on speculation and just simple thumb-sucking, and not knowing what exactly the problem is in terms of the prices that we are confronted with today.

FIFI PETERS: Okay. How long is this going to take you?

SIYABULELA MAKUNGA: It’s going to take us 18 months, as prescribed by the Competition Act, Section 3B, which prescribes that we should complete this work within 18 months. We have already issued the [Government] Gazette, which allows us 20 days to commence with the work.

FIFI PETERS: Okay. We eagerly await the conclusion of your inquiry, Siya, but thanks so much for joining us to give us that detail. Siyabulela Makunga is the head of communications at the Competition Commission.