Loading...

Fruit and veg cartel allegation is 'ludicrous'

Mar 26 2017 11:52
Dewald van Rensburg

Major fresh-produce market agents this week lashed out in response to accusations that they were operating a cartel to push out small competitors and fix the commissions they charged South Africa’s farmers.

The Competition Commission raided the offices of large agents in Johannesburg and Tshwane on Thursday, and expanded the operation to Cape Town and Durban on Friday.

The agents operate at the 19 municipal markets where much of South Africa’s farm produce is sold.

The complaint leading to the raids was laid almost two years ago, in July 2015, by Mogala Mamabolo, the director of marketing at the department of agriculture, forestry and fisheries.

The fresh produce markets sell about 3.4 million tons of fruit and vegetables a year, worth about R14 billion. A small group of large agents is responsible for most of these proceeds.

The Johannesburg market accounts for 43% of sales. Tshwane accounts for 20%, while Cape Town and Durban each account for about 10% of sales.

The commission does not yet have an estimate of the extent to which the agents allegedly distorted prices – or when the alleged collusion started, said spokesperson Sipho Ngwema.

The commission suspects the agents of price fixing – more specifically, that they allegedly manipulate prices down early in the day to force smaller agents to sell out their goods at lower cost, before raising prices near the end of the trading day to benefit themselves.

The markets operate between 5am and 11am.

The commission also claims that the big agents are colluding to fix the commission rate they charge farmers for selling their goods at the markets.

If these allegations are true, the alleged cartel would be manipulating the channel through which roughly half of all South Africa’s fresh farm produce gets sold.

The rest is exported or sold directly from farms.

Backlash

“Both allegations are untrue,” said Jaco Oosthuizen, managing director of the RSA Group.

RSA’s produce accounts for up to 28% of sales at the enormous Johannesburg market and about 22% of the Tshwane one.

“The commissions vary. The only fixed part of it is the 5% the city council takes for managing the premises and acting as a referee,” he said.

“They are in charge of every transaction. They have data on every single transaction.”

The commission alleges that this trade data has shown suspicious patterns of pricing.

However, Oosthuizen countered this, saying: “They see a pattern that does not exist. It is self-contradictory.

“Why would the farmer sell low early in the day? It is absolutely ludicrous. They are not our goods. Ownership remains with the farmer.

“I do not understand why they would do this,” he said of the agriculture department’s complaint.

Oosthuizen suggested that someone might be trying to destabilise what he called a well-functioning market.

“This is a transparent way of discovering price ... It is a system that has provided credible reference pricing since time immemorial and it is completely regulated.”

Oosthuizen said his company was cooperating with the commission.

“They had access to all my computers. They did not take much.”

There was an investigation around potato marketing at the Johannesburg market in 2007, but nothing came of it, he said.

Anton Vos, managing director of Subtropico, also claimed the allegations were nonsense.

Subtropico was also subjected to raids this week.

The company controls roughly 20% of sales out of the Johannesburg and Tshwane fresh produce markets, according to Vos.

“We definitely do not manipulate the price. They do not understand how the market works,” he told City Press.

“There is no way you could manipulate the market price. If, hypothetically, you could, the farmers would benefit. But the buyers are also able to go directly to farmers [if prices are too high].

“They came yesterday [Thursday] with a warrant to go through all the paperwork in the office. We cooperated 100%,” he said.

“In this country, you are innocent until proven guilty.”

According to Vos, price variances result from a variety of factors.

Read Fin24's top stories trending on Twitter:

NEXT ON FIN24X

 
 
 

Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Add your comment
Comment 0 characters remaining
 

Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

The SARB’s Monetary Policy Committee will decide on the next move in interest rates tomorrow will they?

Previous results · Suggest a vote

Loading...