Malls bully spaza shops
TURF WAR: SMALL DEALER TAKES ON SUPERMARKETS OVER BREAD PRICE
Shopping malls have mushroomed in townships around South Africa, providing new products to new customers and driving thousands of small shop owners out of business.
When Tshwanebased entrepreneur Motshwane Mabogoane opened Rori’s Cake & Bake in 2015, his fresh bread even lured customers from larger competitors in Mabopane.
Soon his business became the main supplier of freshly baked bread to local spaza shops that sell bunny chows, of which bread is the key ingredient.
Ruffled feathers
But that ruffled the feathers of supermarkets Shoprite, Big Save and Lifestyle Supermarket. A price war then ensued.
Rori’s Cake & Bake sold a loaf of bread for R5 and its competitors cut their bread prices from R6 to R4. Naturally, consumers were attracted by the cheaper prices and Mabogoane’s business dwindled.
“We have big supermarkets creating a monopoly in the townships,” Mabogoane said on Wednesday in his submission during the Competition Commission’s inquiry into the grocery retail sector.
“They have the benefit of setting prices because of their scale.”
The inquiry was on its third day of submissions in Pretoria.
Mabogoane accused retailers, mainly Shoprite, of squeezing bread prices in the township to the point where smaller businesses can no longer be financially sustainable. “Our bigger competitors sell bread at R4, which is below my minimum production cost,” he said. “There’s no way in hell I can compete with that.”
Shoprite’s store is at the Morula Shopping Complex, about 10km from Mabogoane’s bakery.
According to Mabogoane, who hires 10 people at his bakery, larger competitors use their size to compete on price. Rori’s Cake & Bake can produce 120 loaves of bread in 40 minutes while Shoprite, he said, can produce 340 loaves in the same time.
“Big retailers agree among themselves on the price of bread to suffocate small players and have the power to do so. They maintain their low bread prices even when the price of key bread ingredients such as flour and sugar rise,” he said.
The inquiry is probing competition in the grocery retail sector, as it is suspected that features in the sector may prevent, distort or restrict competition.
On Monday, the inquiry heard that the big four grocery retailers – Shoprite, Pick n Pay, Spar and Massmart – collectively have more than 500 stores in the townships.
Devastating effects
Louis Greeff, MD of buying group Elite Star Trading Africa, said he could not understand how the grocery retail giants could argue that a trader with no limitations to credit‚ products and finances could move into an area and take R50 million worth of turnover per month out of a very small area and have no devastating effects on its economy.
In their submissions, grocery retailers (except Shoprite) said their entry into townships had brought quality products and more choice for consumers.
Independent retailers have also accused shopping mall developers of only reserving retail trading space for the big four.