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Johannesburg – The Competition Commission will probe South Africa’s four large supermarket chains, their effect on small retailers and the impact of their long-term exclusive leases with landlords.
The wide-ranging probe will include informal businesses and look at the dynamics between local and foreign-owned small retailers in townships, according to the terms of reference published in Friday’s Government Gazette.
“The commission is initiating the grocery retail sector inquiry, because it has reason to believe there are features in the sector that may prevent, distort or restrict competition,” it reads.
The movement of large supermarket chains into townships, mainly in shopping malls, had led to a significant decrease in business for nearby informal businesses. According to a study by the Bureau of Market Research in Soshanguve near Pretoria, 75% of informal traders reported a drop in profits within six months of a new mall opening within 1km of their business.
The four large retailers account for more than 90% of the market.
The declining number of small businesses could have an adverse impact on employment, income levels and the spread of ownership in the sector, according to research cited in the terms of reference.
The commission would look at how exclusive clauses in lease agreements retailers signed with landlords affected smaller businesses, as they were prevented from opening shop in the same mall.
“These restrictions tend to mostly affect small and independent retailers who may not be in a position to attract customers if located outside the shopping centre or mall,”
Violence, directed mainly at foreign-owned shop owners, during xenophobic violence earlier this year, was another reason for the probe. Foreign-owned shops were perceived to be more successful, for reasons still not clear.
“This has led to tensions that have sparked into violence in some instances.”
Interested parties had 15 days from Friday to make inputs and comment on the terms of reference.
