Small shops tackle big malls
20-YEAR LEASES ‘LIMIT COMPETITION’ Small, independent retailers are calling on the Competition Commission to put an end to supermarkets’ long leases.
Small, independent retailers are tackling large shopping malls and supermarket anchor tenants over their controversial, exclusive-lease agreements which the small guys say limit competition.
The Competition Commission’s grocery retail market inquiry heard fresh complaints this week on how the lease agreements leave little room for them to grow and trade at shopping malls across the country. These are long-term agreements – as long as 20 years in some cases – between supermarkets and shopping mall owners, allowing supermarkets to be the only seller of specific goods to protect its turf.
These agreements also include restrictions on the type of non-supermarket tenants that mall owners can allow to trade.
The Competition Commission’s inquiry, which was first announced in May 2015 by Economic Development Minister Ebrahim Patel in his budget vote, examines the general state of competition in the grocery retail sector.
Jose Correia from Unitrade Management Services, which provides services to independent wholesalers and retailers, said exclusive leases used by the big four retailers including Pick n Pay, Spar, Shoprite and Massmart should be abolished or limited to five years.
Correia based the limited duration of exclusive leases on the findings from a similar inquiry by the UK’s Competition Commission into the grocery sector in 2005. It recommended retailers at new malls become financially sustainable after five years.
And exclusive leases in existing malls should be subjected to a phase-out period, Correira suggested. “The big four retailers already control 80% of the market and having exclusive agreements in place prohibits the entrance of new independent retailers. It also has the impact of reducing competition,” said Correia.
The commission also heard submissions from smaller landlords, among them Bongo Sepeng, who has owned a property complex in the township of Ga-Rankuwa in Pretoria since 2004. She is a franchisee of OBC Butchery, which operates at her property complex alongside grocery and hardware retailers.
Sepeng argued that 10-yearlong, exclusive clauses help her attract a diverse mix of tenants to her complex. “The exclusive clauses help me to plan forward and making sure that an anchor tenant doesn’t sell what other smaller tenants sell. It helps me to protect smaller tenants,” she said.
In November, the Constitutional Court denied Pick n Pay an interdict to stop Game from selling fresh food at Capegate Shopping Centre in Cape Town. Pick n Pay initially went to the high court on the basis that Game’s food offering was an unlawful interference in its exclusive lease agreement with Capegate’s owner Hyprop Investments. Correia proposed that property developers must be regulated when it comes to the inclusion of small and independent retailers at their new shopping malls.
“Current regulations don’t allow independent retailers to trade at malls. New mall developments must allocate a site at the mall for smaller players to trade.”
The inquiry will run until March 2018.