SA aims to finish inquiry into grocery market in 2017

Shoprite, Pick n Pay, Spar & Woolworths make up more than 90% of the $18 billion a year grocery market.

Picture: Freeimages.

JOHANNESBURG - South Africa's competition watchdog aims to complete an investigation into the grocery market by the end of May 2017, it said on Tuesday, giving a progress report on an inquiry that could loosen the grip of its four main food retailers.

Large retailers Shoprite, Pick n Pay, Spar and Woolworths together make up more than 90 percent of the $18 billion a year grocery market. They are accused of blocking rivals with exclusive shopping mall leases.

The probe, which began in November, came months after Massmart, a unit of US company Wal-Mart, lodged a complaint with the regulator, saying its expansion plans were being hampered by the leasing arrangements.

The Competition Commission said the exclusive clauses in leasing agreements, which can restrict malls from renting out space to rival food retailers for up to 20 years, could be one of the features preventing more competition.

"The exclusivity clauses in the lease agreements may be causing distortion in the grocery retail sector by entrenching barriers to entry and expansion," said Halton Cheadle, a South African university professor appointed to head the investigation.

"A single national grocery retailer operating in a shopping centre may be in a position to charge higher prices due to lack of competition."

The Commision would also scrutinise competition between small informal foreign-owned grocery shop owners and local stores popularly known as "spazas" after anti-immigrant violence last year was partly blamed on anger that foreigners were undercutting local shops.

These foreign shops are owned mostly by people originally from Somalis, Pakistan or Bangladesh.

"Some of the allegations are that foreign operated retailers are not registered and do not pay taxes and that they receive unfair privileges from wholesalers due to shared religious beliefs, amongst others," Cheadle said.

The small spazas were set up in black suburbs during apartheid to sell staples such as maize meal because shopping malls were miles way. The name means hidden in Zulu and reflects the fact the shops were often clandestine operations during the time of apartheid.

These informal convenience shops have also suffered since big retailers rolled into black neighbourhoods, Cheadle said, adding that his investigation would also look into the impact of their expansion on jobs and competition.

Upon completion of the inquiry, the regulator could recommend policy changes to promote competition.