Grocery Retail Market Inquiry makes findings
Updated: Sep 8, 2020
Authors: Nkonzo Hlatshwayo – Director, Phuti Mashalane – Senior Associate & Ave Ralarala – Associate
Lawtons Africa welcomes the findings of the Grocery Retail Market Inquiry which has come to an end after almost four years.
These findings appear to be in line with the spirit of the Competition Amendment Act. This Act seeks, amongst others, to address the high concentration levels of our economy, and to also promote a wider spread of ownership by historically disadvantaged individuals, which are some of the issues identified by the Inquiry in as far as informal and township businesses are concerned.
The findings of the Inquiry included the following:
Exclusive leases: The Inquiry found that well over 70% of the 2000 shopping centres that they looked into are subject to exclusive lease agreements that endure for significant periods of time, some for up to 20 to 40 years. These agreements not only hinder competition, but they also deny opportunities for SMMEs and historically disadvantaged entrepreneurs to participate in the economy. They also deny consumers the benefit of product choices.
The Inquiry took the view that these exclusive leases need to come to an end. The Inquiry recommended that the Competition Commission should, within six months of 25 November 2019, continue the Inquiry’s process and secure voluntary compliance with the recommendations, failing which legislation should be introduced to give effect to the recommendations.
Fair trading practices: The Inquiry found that the buying power of national retail chains enables them to secure more favourable treatment by suppliers compared to the buyer groups and wholesalers that service the small and independent retailers, including spaza shops. The differential in treatment clearly makes it far more difficult for small and independent retailers to compete against the national supermarket chains and has contributed to the national supermarket chains' dominance. The Inquiry believes that there is a need to ensure equal treatment, especially in respect of the granting of rebates. The Inquiry also recommends that smaller suppliers are given more support.
Regulatory and competitiveness support: The Inquiry found that due to consumers’ needs for both bulk and convenience shopping expedition focus, there is scope for coexistence and for spaza shops to survive and thrive. However, the regulatory and infrastructural environment favours the national chains and fails spaza shop owners. The Inquiry observed that regulatory obstacles should be removed, with revision of trading times, enhanced law enforcement and registration of businesses of track informal economic activity. The Inquiry also took the view that there need to be a conscious effort to set up infrastructure in support of informal and township businesses.
The Inquiry ultimately took the view that the situation in South Africa appear to be in stark contrast with most countries which have a larger, thriving and dynamic ecosystem of small and independent grocery retailers and specialist food stores.
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