The Competition Commission is embarking on a fresh produce market inquiry, which seeks to look into pricing and fair play in the market.

The inquiry will consider if adverse effects are present in the fresh produce value chain arising from any feature or combination of features that impedes, restricts or distorts competition.

This follows complaints by role players at the bottom of the value chain in the market that during Covid-19 some producers have engaged in unethical trading techniques.

Informal traders welcome inquiry

The inquiry was welcomed by informal market traders, who called on the government to fund or subsidise farmers so that they don’t have to charge prices that will hit them and the end-user — the consumers — hard.

According to the commission, the inquiry stems from a decision to prioritise fruit and agri-produce after it was found that there were ‘exponential’ increases in price-related complaints lodged with the commission.

Another issue raised in the complaints is price discrimination and discrimination on the allocation of stalls in the fruit and vegetable market.

Commission spokesperson Siyabulela Makunga told The Witness that having received the complaints, the commission now seeks to examine whether there are any features in the fresh produce value chain that impede, restrict, or distort competition in the market.

“Following the onset of the Covid-19 pandemic and the resultant declaration of the state of national disaster, the commission investigated a large number of complaints with respect to price gouging conduct.”

“Basic food and fresh produce products accounted for the vast majority of complaints and subsequent investigations. The commission’s records show that of the 1 254 excessive pricing investigations relating to Covid-19, 713 (or nearly 57%) related to basic food and fresh produce. Of these, 322 related to ginger and garlic for which significant price increases (some of more than 300%) were observed over the second wave of infections in late 2020 and early 2021.

“This shows the importance of fresh produce, but in the same breath, may show the potential for abusive conduct relating to essential food items where market circumstances change suddenly.”

Price discrimination

Another issue raised in the complaints is price discrimination and discrimination in the allocation of stalls in the fruit and vegetable market, said Makunga.

“During the inquiry we will be talking to academia, farmers, farmers’ associations, government and other role players. These discrepancies hit the consumer, hence the need to address these issues through the value chain. We are looking at both the emerging and established players in the fresh produce sector.

“Should we find any glaring discrepancies during the inquiry we will not hesitate to exercise our power to deal with delinquents or impose corrective measures.”

Specifically, the scope of the inquiry will cover aspects from the sale of fresh produce by the farmer to the customer (the retailer, processor, or export market).

Specific aspects relating to key inputs (such as seeds, fertiliser, and agrochemicals) that will be considered under this theme are concentration levels, price discrimination, buyer power, and exclusivity.

Makunga said special consideration will also be given to the barriers faced by small, medium, and micro enterprises and firms owned or controlled by historically disadvantaged persons.

In terms of a section in the Competition Act 89 of 1998, the commission must publish these terms of reference in the Government Gazette announcing the establishment of the market inquiry at least 20 business days before the market inquiry commences.

Chief executive of the Pietermaritzburg and Midlands Chamber of Business, Melanie Veness, said the chamber was not in a position to comment at this point as the inquiry has just been initiated.

Farmers in the Midlands referred the reporter to Kwanalu.

Kwanalu Advisory Council representative for uMgungundlovu District Bobby Hoole said farmers were ‘generally price takers’ and not ‘price makers’ in the value chain.

He said when there is a shortage, however, supply and demand (elasticity) will obviously force prices to increase.

“An example is the record rainfall in spring and early summer leading to shortages of potatoes. The farmers couldn’t harvest and so the market was prepared and still is prepared to pay higher prices. The farmers, however, continue to struggle to harvest potatoes in the conditions and the quality has deteriorated substantially. Just the facts around the current situation, weather plays a huge role in the supply and demand chain and hence prices will be impacted. I do not believe there is any truth in the allegations of price manipulation,” said Hoole.

He said he was not aware of possible bias in market stalls.

Pricing issue needs government intervention

Informal market traders meanwhile said the pricing issue needed government intervention.

Jabulani Khumalo said his Retief Street fruit and vegetable stall attracts customers but they get grumpy at the prices.

He said the government needed to subsidise farmers to ‘relieve the burden’ carried by those at the low level of the value chain.

“Before Covid-19 a bag of onions was R50 but now it’s R80 because of the prices we pay. We are struggling just to get by. A [vegetable] combo consisting of a bag of onions, potatoes, a box of tomatoes and a bag of butternut was R150 but the price has doubled after Covid-19. Farmers seek to break even by heavily pricing their products.”