Ban exclusivity clause — Resilient

One of the largest owners of South African shopping centres, Resilient Reit, said at a Competition Commission inquiry on Tuesday that exclusivity clauses should be banned in SA.

One of the largest owners of South African shopping centres, Resilient Reit, asserted at a Competition Commission inquiry on Tuesday that exclusivity clauses served no purpose for landlords or the general economy and should be outlawed in SA.

Resilient Reit executive director Johann Kriek made this submission to the commission when he answered questions on how leases varied between anchor tenants and line stores as well as how shopping centres supported retailers by bringing foot traffic to towns.

The commission is holding public hearings this week as part of its inquiry into grocery retailing. The inquiry began on November 27 2015.

The probe includes a study on exclusivity clauses. These are clauses where an anchor tenant, for example a national food retailer, signs a lease trade in a mall with the condition that other national food retailers may not trade in that mall.

Many landlords have said that these clauses are archaic and do not help smaller retailers to succeed.

Kriek said exclusivity clauses inhibited retail trade in SA.

“An exclusive trade arrangement would be an extremely inhibiting factor for all competing retailers. We must not support exclusive trade arrangements. The market must operate in the most natural manner possible, based on supply and demand,” he said.

Kriek said Resilient would prefer to have various national retailers in the same mall competing with one another. By having large retailers, more shoppers would be attracted to the centre and this would make it more viable for small stores to operate in a mall.

The main objective of the commission’s inquiry is to probe the effect of national supermarket chains on small and independent retailers in townships, peri-urban areas and rural areas, as well as the informal economy.

THE MARKET MUST OPERATE IN THE MOST NATURAL MANNER POSSIBLE, BASED ON SUPPLY AND DEMAND

Kriek said shopping malls did not necessarily negatively affect the operations of small formal and informal traders near them.

Instead, malls brought huge economic benefits to areas, especially by creating jobs.

The commission commended Kriek and said his group had been “more forthright than any other property developer had ever been in a submission” with respect to how leases were calculated and negotiated for anchor and ancillary tenants.