Abstract
The marketing of fresh fruit and vegetable produce in South Africa is mainly undertaken using the National Fresh Produce Markets (NFPMs), hawkers (informal traders), processors, wholesalers and retailers. NFPMs constitute the largest wholesalers of fresh fruit and vegetables and are an important link in the fresh fruit and vegetables supply chain. The Johannesburg Fresh Produce Market (JFPM) is the largest market in the South African fresh produce marketing system, in terms of market share based on turnover with 44.3% of the market. Larger grocery retailers or supermarket chains are second strongest buyers from NFPMs in both value and volumes. Although there are alternative retail routes to market, retail/supermarket concentration is escalating in South Africa, as it is around the world. Since retailers have been the most important intermediaries connecting producers/farmers and end consumers, concentration and buyer power at this level can put food producers and fresh produce marketplaces under considerable stress. The practices engaged in by supermarket chains with market power in concentrated markets can affect competition and outcomes in the NFPMs. This has implications for consumers, competitors/rivals and suppliers.
In this study, I assessed where market power lies and whether this has contributed to asymmetric price transmission in the fresh produce value chains of onions, tomatoes, and potatoes, the top three products sold from NFPMs by volume were at 1.7 million tons in 2018. I primarily employed qualitative research methods to understand the existence and impacts of market power in fresh produce markets. I utilised basic quantitative techniques in the form of marketing margin analyses and correlation ratios to evaluate trends in the retail–wholesale margins to determine the margins in the value chains. I also undertook a correlation analysis to ascertain any association of prices between the retail and wholesale levels with APT.
I established that there were high retail–wholesale absolute margins for all three selected products, suggesting that higher surpluses along the value chain were being extracted by retailers. This is especially the case for the three selected vegetables, since limited value
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addition and processing occur between their wholesale and retail levels. Additionally, correlation coefficient analyses revealed that retailers do not take into account for producer price variations but set prices at the retail independently of wholesale prices. This is a sign of asymmetric price transmission and the market power of retailers. The significant impact for consumers is that, when prices decline in the wholesaler/JFPM, consumers may not gain from it at the retail level, whereas price increases are passed on to consumers.