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Submission to Grocery Retail Sector Market Inquiry

by Leif Petersen, Sustainable Livelihoods Foundation in 2017

Corporate retailers constitute an important element of the core of the South African food economy. Our submission argues that formal sector grocery retail is distorting food economies in ways which disadvantage other stakeholders of food value chains (Greenberg 2016). These effects are felt both upstream in the packaging, processing and production of food as well as horizontally among informal-sector grocery retailers. Some important factors that impact on grocery retailing in the township economy are:

  1. Inappropriate government policies (in particular municipal policies towards informal micro-enterprises)
  2. Unfair competition from the corporate retailing sector via shopping malls and large chain businesses by creating localised grocery retailing monopolies in the township residential setting.
  3. Unfair competition from the corporate retailing sector by government outsourcing of SASSA grants distribution to corporate retailers “captures” an essential revenue stream. 

In addition, formal food retailers unfold significant up-stream value-chain impacts: procurement standards are often exclusionary, and participation in formal retail chains is at terms very disadvantageous to small producers, who cannot easily meet stringent quality, cold-chain and reliability standards. This encourages the further consolidation of upstream segments of food value chains spanning production, processing and packaging. This tends to promote the development of a less diversified and competitive food economy.

Furthermore, grocery retailers have immense power in structuring consumer perceptions on food quality and health, from input into apparently neutral dietary-based guidelines to advertising (Greenberg 2016). Through product selection, placement, in-store promotion and advertising, large corporate retailers promote ultra- processed, highly processed and branded products emerging from highly-concentrated, capital-intensive food- processing industries. They thus cultivate a consumer food environment which disadvantages small, local producers and processors to the benefit of the capital-intensive formal food processing industry.

Inappropriate policy commonly includes municipal land use zoning and business permitting within informal economy and specifically township businesses. Land use zoning in townships is primarily for residential use only, and changing zoning to allow for business activities requires cumbersome and technocratic bureaucratic procedures largely out of reach of most informal economy businesses. Conversely formal sector business – in particular South African supermarket chains have the legal and financial means to buy and rezone land to suit their business needs. The unfairness of this competition lies less in the actions of the formal retailers, but in the perpetuation of the structural inequality of South Africa’s economy that favours formal sector business over an emerging entrepreneurial class of township retailers. The outcome of this power imbalance in a community such as Delft South (the case study in this submission) is potentially localised monopolies of grocery trading.