As South Africa's food prices continue to climb at the fastest rate since 2009, the competition watchdog has launched an inquiry into the market for fresh produce.
The investigation will look at competition in the supply chain – including the role of farmers, retailers and exporters – and the resultant prices.
The focus will be on apples, bananas, oranges and other citrus produce, stone fruit, pears, avocados, grapes and nuts, along with vegetables such as potatoes, onions, tomatoes, sweetcorn, carrots and cabbage.
According to the Competition Commission's terms of reference for the inquiry, which was gazetted on Tuesday, the investigation 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". The inquiry may span 18 months.
One of the areas of concern that the commission has flagged is the issue of concentration. A previous study by the commission found that while large farms made up just 6.5% of all farms in SA, they accounted for 67% of total income in 2017-2018.
The number of farms had dropped from 58 000 in 1993 to just over 40 000 in 2017, representing a decrease of 31%. KwaZulu-Natal, Mpumalanga and Limpopo saw the largest declines.
The commission says its previous research into food prices "consistently highlighted that the sharp decline in the number of commercial farms may be indicative of the difficulties smaller farmers face in reaching the necessary economies of scale to decrease costs and maintain profitability".
The commission previously noted that larger players can exert market power on smaller players, and that it hurts transformation of the sector, as new entrants including black farmers "struggle to become established and sustainable without entering at scale".
The behaviour of retailers and fresh produce markets will also be investigated.
"In light of the public comments and further stakeholder engagements, it has become apparent that the interaction of particular retailers, and to some extent end consumers, cannot be excluded from the consideration in the inquiry. In the same vein, the dynamics of the fresh produce processing markets cannot be excluded from the inquiry."
Complaints about price-gouging during pandemic
The commission said there "appears to be broad concern over price levels and volatility of pricing for fresh produce" in SA.
Of the 1 254 excessive pricing investigations during the pandemic, nearly 57% were related to basic food and fresh produce.