The Competition Commission’s Fresh Produce Market Inquiry (FPMI), in its final report released on Monday, noted market manipulation and a lack of transparency in the fresh produce value chain as it singled out African Rainbow Capital (ARC) for its substantial shareholding in two dominant market players, recommending divestment to address competition concerns.
The inquiry, which focused on five fruits (apples, citrus, bananas, pears, and table grapes) and six vegetables (potatoes, onions, carrots, cabbage, tomatoes, and spinach), identified high concentration levels, significant barriers to entry, and limited competition across the sector.
Deputy Competition Commissioner Hardin Ratshisusu, presenting the report to the Minister of Trade, Industry and Competition, Parks Tau, expressed concern about the alignment of economic interests between competitors with a common shareholder. He noted that in highly concentrated markets, this alignment reduces the incentive for firms to compete aggressively for market share, leading to adverse consequences for market transparency and participation.
He said the FPMI considered the profile of the largest market agents across the top four national fresh, the RSA Group, Subtropico Market Agents, the Grow Group, Dapper Market Agents and Prinsloo and Venter Market Agents in Johannesburg, Tshwane, Cape Town and Durban.
It found that ARC previously owned over 50% of the RSA Group, but now holds more than 30% of shares in both the RSA Group and Subtropico following a 2024 restructuring. This substantial cross-shareholding, the report stated, distorts competition by removing the incentive for either company to compete for market share, as any gains or losses would not affect ARC’s overall returns.
The FPMI provisionally recommended that ARC divest its shareholding in one of the two firms, stipulating that the buyer must be a historically disadvantaged person (HDP)-owned and controlled entity to maintain the divested company’s Broad-Based Black Economic Empowerment (BEE) status.
Ratshisusu said ARC disagreed with the FPMI’s provisional finding that its cross shareholding in Subtropico and the RSA Group distorts competition, arguing that while there may be a theoretical concern on the potential competitive risks that could emanate from cross-shareholdings, any such potential concerns only occur under particular circumstances, and their likelihood requires a specific investigation into the role the common shareholder plays in governing pricing decisions at the firms, as well as competitive dynamics that shape interaction between rivals in the market.
However, the FPMI said it observed that African Rainbow Capital has substantial knowledge and potential for influence at both the RSA Group and Subtropico, suggesting that its role extends beyond that of a mere “passive” investor.
The FPMI said it was confident that even without an involvement in day-to-day decision making, ARC had substantial influence over key actions of the company. In particular, for example, one of the key actions of a company is to decide whether to compete “aggressively” or “weakly” against particular companies, or in general. These general decisions can influence market outcomes.
The FPMI found that ARC’s cross-shareholding in the RSA Group and Subtropico impedes, restricts or distorts competition in the trading of fresh produce at NFPMs and recommended to the Competition Tribunal that African Rainbow Capital must divest its shareholding in either Subtropico or the RSA Group, and that the buyer of divested shares must be a firm wholly owned and/or controlled by an HDP.
"This recommendation is suspended for six months, to allow African Rainbow Capital an opportunity to voluntarily comply with this remedial action," Ratshisusu said.
Shares in businessman Patrice Motsepe-controlled ARC fell 3.98% to R8.93 on the JSE by 3pm on Monday.
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