DURBAN - SMALL and emerging farmers face immense challenges in the agricultural industry, such as poor yields and low productivity, making it nearly impossible for new entrants to survive.
This was one of the issues raised in the Essential Food Pricing Monitoring Report which was recently released by the Competition Commission. The report revealed that in 2007, South Africa had 3 899 dairy farmers, but the figure had dropped to 1 053 in 2021.
The commission’s report focused on tracking the impact of the Covid-19 pandemic and the corresponding economic crisis on food markets. It revealed a clear drop in farmer numbers and an increase in concentration across the value chain.
“There are concerns with market power across the value chain with farmers, especially small farmers, facing low operating margins,” said the report.
Concerns raised in the report include: The wide farm-to-retail spread in prices.
Large price differences between regions for basic fresh produce.
Growing margins at the processor and retailer level.
Price inflation from the start of the pandemic for some fresh produce due to global supply chain issues and exchange rate effects.
The latest report shows that the agricultural value chain is highly industrialised and characterised by the super commercialisation of production via large-scale farming.
It said in terms of South Africa’s increasing concentration trends, a key aspect was the high levels of concentration at the input as well as the processor and intermediary levels of the value chain which create a squeeze for smaller farmers and threaten their survival in the market.
“Small and emerging farmers face several challenges, such as poor yields and low productivity, and where small emerging farmers do exist, there are still barriers to scaling from smaller to larger growers, such as access to finance, infrastructure, and routes to market, which could provide the necessary scale to become more efficient,” the report said.
It noted that while there have been clear increases in pricing for products such as potatoes, tomatoes, and cooking oil, there was no indication that the continuation of Covid-19 and panic buying had pushed food prices up further.
“Rather, it seems that the increased frequency of extreme weather events locally and internationally is resulting in high food price inflation over the past 18 months,” the report stressed.
The commission indicated that it had received complaints of price gouging in KwaZulu-Natal involving essential food products that were affected by the unrest in July.
Advocacy group Pietermaritzburg Economic Justice and Dignity Group (PMBEJDG) welcomed the report, saying it created foundations for greater transparency in the food supply system.
It conducts monthly food basket studies in which it looks at how much a family spends on a food basket consisting of essential food items from rice, flour, meat, vegetables and other important food items in different cities.
Its August 2021 report showed that the cost of all baskets, regardless of the region, increased, and that the cost of all baskets, including the average cost of the basket, is at its highest level since the organisation started tracking the household food basket in September last year. Their report further revealed that between July 2021 and August 2021:
The Durban Household Food Basket increased by R161.60 (3.9%) and now stands at R4 288.51.
The Pietermaritzburg Household Food Basket increased by R128.33 (3.2%) and now stands at R4 093.
PMBEJDG Mervyn Abrahams said all players in the food system needed to be open about how they were pricing their products, as this would also expose those manipulating prices.
“What we need to know is how items are priced from the farm gate right until the supermarket till, because not only does that leave the consumer aware, but can also lead to a point where food prices are affordable.”
He made reference to the bread price fixing that was exposed a few years ago and how the investigation had led to the price stabilising for the essential item.
South African Farmers Development Association (Safda) chief executive Siyabonga Madlala said it was not a surprise that small-scale farmers were battling to survive in the market, as the system was working against them. He said there remained a need for government to intervene in the short term to shield them from being pushed around by giants in the industry.
“The government should not be apologetic about its intervention which should be in the form of land acquisition, skills transfer and money for operations, this is how agriculture in this country came about because the previous government realised the importance of this sector. Our government should therefore do the same,” stressed Madlala.