Presentation to the Portfolio Committee on Agriculture,
Fisheries and Forestry
TEMBINKOSI BONAKELE
Deputy Commissioner, Competition Commission
08 July 2009
To w a rd s
a
fai r
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effi c i ent
ec onomy
for
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Background
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Regulation – Agricultural marketing boards,
co-ops
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Deregulation effects since after 1996:
 closing down of boards;
 market concentration;
 dominant private corporations and private
co-ops
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Price increases, selected food products
(StatsSA)
700g Brown Bread
2.5kg Mealie Meal
1kg Fresh Beef Mince
1kg Fresh Chicken
Portions
2L Fresh Milk
500g Brick Margarine
750ml Sunflower Oil
1kg White Sugar
Jan 2008-Jan
2009
34.2%
6.6%
12.3%
13.8%
April 2008-April
2009
22.4%
6.3%
13.2%
16.0%
7.7%
53.2%
28.9%
10.5%
7.5%
34.4%
-9.7%
16.4%
Bread, flour and wheat prices,
Rand per 700g brown loaf
8.00
7.00
Mark-up of bread over wheat, Rand per loaf
556g wheat SAFEX, Rand
500g flour, CPI, Rand
6.00
5.00
4.00
3.00
2.00
1.00
0.00
700g brown loaf, CPI, Rand
High food prices - contributory factors
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Availability of grains worldwide
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Unfavorable climatic conditions
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Increased demand for animal proteins
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Increasing energy and fuel costs – transport
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Increasing input costs – fertilizer
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Anti-competitive conduct in the agro-food
chain
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The agro-food chain
Inputs
Primary production
Processing/Packaging
Distribution/Retail (local and exports)
Consumers
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Commission’s interventions
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Prioritisation of the food value chain
 Impact on low income consumers
 A number of complaints
 Research and scoping exercises show
strong indications of anti-competitive
conduct
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Major Cases
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Retail
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Bread and milling
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Grain storage and trading
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Dairy
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Poultry
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Pelagic Fish
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Animal feed
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Fertilizer and other input sectors
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Fats and Oils
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Supermarkets
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What led to the investigation?
 Public outcry re food prices = preliminary study
 Buyer Power – rebates & listing costs
 Long term lease agreements – raising entry
barriers
 Category Management – facilitating collusion
 Information Exchange – Role of market
intelligence consultants
 Complaint from Milk Producers Organisation
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Bread investigation
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Commission tipped off of simultaneous price increases,
initiated an investigation
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Blue Ribbon (Premier), Albany (Tiger), Sasko (Pioneer) &
Foodcorp
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Price fixing & market allocation
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Progress:
 Premier: leniency in terms of Commission’s Corporate
Leniency Policy
 Tiger: penalty of R98 784 869.90
 Foodcorp: penalty of R45 406 359.82
 Pioneer: defending case, June 2009
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Initiated investigation in milling
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Grain storage and trading
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Complaint received by trader against Senwes
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Abuse of dominance in the storage & handling
of grain
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Tribunal ruled exclusionary conduct – sec 8(c)
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Matter is being appealed
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Other cases in grain storage under investigation
TOW A
T oR wD aSr dAs FaA If R
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Dairy
• Commission referred complaint -Dec 2006
• Collusion & abuse of dominance by processors:
(Clover, Parmalat, Lancewood, Woodlands,
Nestle, Milkwood)
• Appear to have regulated the markets themselves
following governments de-regulation
• Suppressing raw milk prices, raising barriers to
entry through exclusive arrangements
• Case is currently tied up in legal processes
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Poultry
• Commission referred case against Astral in 2008
• Abuse of dominance, especially in breeding by
engaging in exclusionary conduct.
• Poultry industry main source of protein for majority
• Increasing vertical integration and concentration
• Concerns around exclusionary conduct at different
levels (breeding – broiler)
• Case is at the pleadings stage
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Fertilizer
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High levels of concentration in many inputs to farming,
including fertilizer
Fertilizer is the single largest input cost in production of
crops such as maize, wheat; competitive pricing crucial
for increased food production
SA makes two of the three main ‘building blocks’ for
fertilizer: Nitrogen (in form of ammonia) and Phosphate
Long running cartel from 1990s fixing prices and
allocating customers and markets – Sasol reached
settlement with Commission, with penalty of R250mn;
case proceeding against Omnia and Kynoch/Yara
Sasol is local monopoly in ammonia production, charges
inland import parity prices; cases proceeding of abuse of
dominance
Foskor is local monopoly supplier of phosphate rock –
reaching settlement with Commission
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Commission's work
• High concentration levels prevail, barriers to entry,
poor competitive outcomes
• Need to:
 undermine cartels, opportunities for new entry
 Increase agricultural production by addressing
effects of anti-competitive conduct on costs
 Improve understanding across govt and relevant
public institutions
• It will take time for markets to adjust
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How can you help?
• Business, labour, community, government
• Proactive action, collective responsibility
• Improve understanding
• Pressure on companies to comply
• Monitoring market conditions
• Reporting anti-competitive conduct
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Thank you!
Tel: 012 394 3294
Fax:012 394 4294
email:
tembinkosib@compcom.co.za
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