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ABSTRACT
The retail space has seen significant changes in post-apartheid business. Spurred by the end of apartheid urban laws, rising urbanisation and increased per capita income, large South African retailers, especially supermarkets, have increased their footprint, diversified their formats and started targeting low-income segments of the population. The large chains have made substantial investments in distribution and procurement systems and in retail space in shopping malls to realise economies of scale and scope. They have also grown in southern Africa, shaping markets across countries.
This paper assesses the drivers of these changes and the extent to which substantial market power in retail lies with the main groups. It evaluates the ways in which market power has been exerted and the impact supermarket growth has had on the competitive landscape including on independent rivals. The implications on suppliers, as supermarkets are increasingly important routes to market for processed food and household consumable products, are evaluated, in addition to the impact of buyer power. The paper explores the implications for regulation, competition policy and industrial policy.
Disclosure statement
No potential conflict of interest was reported by the author.
Notes
1. UNU-WIDER Working Papers: das Nair and Chisoro (Citation2015, Citation2016, Citation2017), Ziba and Phiri (Citation2017), Chigumira et al. (Citation2016). See also Das Nair (Citation2017); Das Nair, Chisoro, and Ziba (Citation2018).
2. The Competition Commission is a statutory body constituted in terms of the Competition Act, No. 89 of 1998 by the Government empowered to investigate, control and evaluate restrictive business practices, abuse of dominant positions and mergers to achieve equity and efficiency in the economy.
3. Testimony by Elite Star Africa, GRMI, 5 June 2017, p8; Presentation by Msunduzi Municipality, Pietermaritzburg, highlighting the financial drain out of townships because of malldevelopment. Slide 11, 7 July 2017.
4. Carrefour entered Kenya after 2013.
5. Annual Reports. These numbers only include grocery retail offerings.
6. Compound Annual Growth Rate.
7. This does not include independent supermarkets and informal shops.
8. The chains also typically have multiple offerings such as liquor, clothing, furniture, fuel court convenience outlets, money market services and pharmacies.
10. A longer time period would provide better insights into these trends. Data for earlier periods was unavailable to the author.
11. https://www.fin24.com/companies/retail/pick-n-pay-concludes-franklins-sale-20110930 andhttp://www.bizcommunity.com/Article/196/182/49575.html.
12. Although these have been more manufacturing oriented.
13. http://www.financialmail.co.za/coverstory/2016/06/03/can-pick-n-pay-regain-its-former-glory, accessed 1 October 2016.
14. http://www.moneyweb.co.za/archive/r628m-distribution-centre-for-pick-n-pay/, accessed 25 August 2015 .
15. The importance of accessing store sites in mall developments was highlighted by specialist stores and independent retailers in the GRMI, as well as in competition cases before the Commission, as discussed below.
16. E.g. Testimony of Unitrade Management Services, GRMI, 6 June 2017, p5 .
18. Shoprite Checkers; Pick ‘N Pay; Spar Group vs Massmart Holdings, CRP034Jun15.
19. See for instance, Unitrade Management Services, GRMI, Gauteng, 6 June 2017, slide 15.
20. See for instance, Pick n Pay, GRMI, 3 November 2017, p 8.
21. https://www.parliament.gov.za/storage/app/media/Docs/bill/123743eb-a1bf-40b7-9492-e4ddcf4d5a0c.pdf.
22. Standard Bank. 30 October 2017. p7.GRMI Pretoria.
23. Such as the one created as part of conditions in the Massmart/Walmart merger: http://www.economic.gov.za/downloads/walmart-massmart-merger.