In its investigation into South Africa’s poultry market, the Competition Commission should revisit research into market concentration in the country’s agricultural sector conducted by the respected, independent Bureau for Food and Agricultural Policy (BFAP).
In 2021, BFAP looked at concentration levels in various sectors in South Africa by comparing the income share of the top 20 enterprises in that industry to its total income.
The agricultural sector came out best of all, with the lowest concentration level of 12%. This included poultry meat and egg producers.
Food retail was at 27% and agro-processing at 52%. The industries with a few dominant companies were mining (73%), fisheries (78%), Forestry (80%) and postal services and communication (86%).
“Clearly both agriculture and the agro-processing sector are not the most concentrated sectors in the economy. And concentration is driven by SOEs and the other resource-based industries (mining, forestry and fisheries).
“Furthermore, while the 20 largest agro-processing firms had 52% of market sales, this was in the same order of magnitude as ‘other manufacturing’ (e.g., chemicals, glass, metals) and retail trade.
“It might come as a surprise that the primary farm sector had the lowest level of concentration amongst all sectors, with a mere 12% of income being produced by the 20 largest firms, which include the corporate sugar, poultry meat and egg producers.
“Using this metric clearly does not support inferences about widespread concentration of the farm economy,” the BFAP said.
It noted that, globally, farming units were getting bigger and the number of individual farms was therefore declining. In South Africa, without the subsidies enjoyed by famers in the European Union and the United States, it was the “drive towards international competitiveness and open markets” that drove productivity growth and declining farm numbers.
The BFAP called for evidence-based analysis and an improved agricultural database “in order to avoid over-hasty conclusions about the extent of concentration in the sector”.
