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Media Centre | COSATU Press Statements
COSATU Supports the Grocery Sector Retail Market Inquiry
2 July 2015
The Congress of South African Trade Unions (COSATU) welcomes the launch of the Competition Commission’s inquiry into the grocery sector retail market.
We have always argued that the triple interrelated challenges of poverty, unemployment and poverty are mainly caused by large scale concentration in various sectors of the nation’s economy.
These monopolies were developed by apartheid-era economic policy interventions and are still hegemonic in the structural make-up of the post-apartheid political economy.
The Federation pointed this in its 2012 Socio-Economic Report, which stated that various sectors were dominated by a few large entities.
The grocery retail market is also characterized by high levels of concentration. COSATU’s Socio-Economic analysis from 2012 highlighted the fact that: the wholesale and retail trade sector is a monopoly industry, dominated by two firms: Shoprite and Pick ‘n Pay, which constitute 66% of the markets share.
Our view has been substantiated by recent studies which have illustrated the lack of competition in the retail grocery sector.
Only four large retailers account for 90 % of the market share.
This concentration has produced the following negative socio-economic effects.
Firstly, increased food insecurity and malnutrition because of the limited choice that consumers have. The commodity prices of staple food increased by 50 % between February 2013 and 2014.
Moreover, the cost of the basic food basket increased by about R40 (+8.8%) between October 2013 and 2014 .These food insecure citizens reside in working class communities such as townships and rural areas. “The largest percentage of participants who experienced hunger (food insecurity) were in urban informal (32.4%) and in rural formal (37.0%) localities”. Africans constitute the largest proportion of food insecure citizens in SA. The black African race group had the highest rate of food insecurity (30.3%), followed by the coloured population (13.1%).
Secondly, it has led to the economic marginalization of small business and traders across the country. This trend is most prevalent in working class dominated areas such as townships and rural areas.
Large retailer’s expansion into these localities has decreased the revenues of these traders.
According to the Bureau for Market Research (2008), most small informal businesses in townships experienced severe economic losses as a result of the migration of national supermarket chains into their areas.
Thirdly, it has also exacerbated the socio-economic challenges in townships and rural areas.
The decline of small business and traders has had negative effects on employment and household income. More worryingly, it has also stifled the development of local economies.
COSATU has always pointed out that increased localization is integral for economic development and diversification. It will create employment; decrease the dominance of large entities (foreign and domestic); alter the apartheid-style spatial economic development patterns; and lower the costs of basic goods and services for the working class.
It should also be noted that the grocery retail sector is characterized by precarious and atypical employment.
Most workers in the sector do not enjoy their basic labour-related socio-economic rights.
Negative practices such labour broking, outsourcing, casualisation and low-pay are prevalent in the sector.
COSATU strongly believes that this inquiry is essential for addressing the above-mentioned socio-economic trends.
The Federation will participate in the inquiry and raise a number of important issues that are integral for achieving genuine economic transformation through localization.
Issued by COSATU
For more information contact:
Khwezi Mabasa (Social Development Policy Co-ordinator)
Congress of South African Trade Unions
110 Jorissen Cnr Simmonds Street
Tel: +27 11 339-4911 Direct 010 219-1324
Fax: +27 11 339-5080
Cell: 076 105 5849/ 082 375 0568