Fresh produce sector to be probed for unexplainable food price hikes

The South African Competition Commission has promised to launch a fresh Produce Market Inquiry (FPMI) on March 31.

The probe is to discover whether there are any activities or features in the fresh produce value chain that impede, restrict or distort competition.

According to the commission, it also aims to complete the inquiry within 18 months and publish a report on its findings by September 2024.

The commission has identified five fruits and six vegetables for which the value chain will be investigated, including apples, citrus, bananas, pears, and table grapes, as well as potatoes, onions, carrots, cabbage, tomatoes, and spinach.

These fresh produce items account for 70% of fresh produce sales in South Africa and this comes after consumers have been hit hard by high food prices in recent years.

This can be credited to supply chain disruptions brought about by Covid-19 and the Ukraine war, as well as high inflation.

However, an inefficient or uncompetitive value chain may also contribute to high food prices.

A dedicated team has been appointed to undertake the FPMI. It will engage with interested parties, including through public hearings in all provinces where the identified fruit and vegetables to be investigated are produced.

Responding to why the commission initiated this FPMI, Competition Commission commissioner Doris Tshepe told the media on March 23 that they had a reason to believe that features may exist in this market that made it uncompetitive.

These included “complaints received alleging anticompetitive conduct and unexplainable, alarming increases in certain product prices, with many prices increasing beyond the yearly inflation rate.

“These increases had had a disproportionate effect on low-income households, she confirmed.”

Per Engineering News, because the “South African fresh produce market is characterised by high levels of concentration in the value chain”, it provides a base for collusive or other uncompetitive behaviours.

Tshepe said the commission would look at routes to market, cost of participation in the market, barriers to entry, concentration levels, price determination methodologies, buyer power, and how direct contracting between farmers and wholesalers or retailers work.