Commission’s food retail inquiry tackles all economic debates
Tembinkosi Bonakele and his team at the Competition Commission are quite a busy lot. Every week, one hears of market inquiries from the transport sector, to margarine.
No inquiry bears greater significance for the kind of transformation our economy and society needs than the one into the grocery retail sector.
As Reena Das Nair of the Centre for Competition, Regulation and Economic Development noted, the grocery retail sector (more so large supermarket chains) is not only a key source of food for many, but also “a key route to market for many suppliers of food and household consumable products”.
These large retailers are what is called in textbook economics, monopsonies. Not in the strictest use of the term, but the dominance by a few players reinforces the “market situation in which there are only a few buyers”.
What effect does this have on the supplier industry and the value chain more broadly?
How these suppliers get their products to the shelves is one of the issues looked into by the market inquiry. It remains a crucial sector in the policy conversation. It touches on all the key contemporary economic debates: land, financial sector transformation, property, social wage issues and agrarian reform.
Trevor Manuel might deny the existence of “white monopoly capital” or deride it as a creation of the Bell Pottinger propaganda machine, but there is concentration in our economy.
There is no better example of this pervasive and persistent dominance than the grocery retail sector. The four largest supermarket chains operating in SA collectively account for more than 90% of the market. That’s one part of the issue. The other concern relates to the contentious “alliance” between commercial banks (and their associated retail property interests), property developers and large supermarket chains.
This “alliance” gives rise to exclusive anchor tenant arrangements, onerous listing requirements for suppliers, and many other barriers to entry, that contribute to making “commitments” to the development of small business, “hollow rhetoric”.
Similarly, when suppliers want their products to be at “eye level”, the fees become extremely high, creating difficulties for suppliers to place their products where the footfall is largest and growing at that.
The foray of malls and shopping centres into townships, rural areas and peri-urban areas requires interrogation. The assumption is often that such entry signals development and the capture of a vibrant consumer market with buying power.
However, as Soweto Business Access, an advocacy and small business lobby group, noted at the market inquiry hearings, “the government is failing to deliver on the widening of the retail market and as such, is hindering the progression of small business in the sector”.
The organisation also suggested that large retailers, as part of their transformative efforts, need to do better in providing shelf space for brands in rural areas and townships that are creating jobs, at no cost.
THE GOVERNMENT IS FAILING TO DELIVER ON THE WIDENING OF THE RETAIL MARKET AND IS HINDERING THE PROGRESSION OF SMALL BUSINESS
The “relaxation” or even potential regulation of such restrictive arrangements is necessary and urgent. We often make great noise in this country about the need to develop small business, but at a practical level, developing small businesses requires confronting the dominance, anticompetitive and restrictive market conduct of those from whom we buy food and our daily necessities — retailers.
It is also unsettling to observe how the enforcement of bylaws and notions of a world-class African city often betrays even the most fervent commitment to the development of enterprises and ignores the generations of entrepreneurs who of necessity have built thriving informal trade.
The debate needs to factor in what happens to them when the big boys come into the playground. One hopes that, a year from now, when the commission completes its inquiry, we will be more alive to this reality than our current ambivalence suggests.