By Myriam Hammadi, April 2023.

At the Shamba Centre, we believe so.

The consequences of market concentration on MSMEs and access to food

According to Carin Smaller, the Executive Director of the Shamba Centre, “Market concentration and consolidation of unfair power is preventing small scale producers and small and medium enterprises from entering, accessing and benefiting from market opportunities”.  

For more than 20 years, concentration has been dramatically increasing in the food and agricultural markets, and lower-income countries are more badly affected than developed markets, because the markets are smaller, and the barriers are higher.

This has a negative impact on small producers as well as on consumers. “Market power means smaller participants are vulnerable, notably because the income they perceived is pushed down. Consumers are also victims, as prices are going up for them. This results in increased poverty, and diminished access to food” notes Professor Simon Roberts from the University of Johannesburg and Founder of the Centre for Competition, Regulation and Economic Development (CCRED).

The problem of concentration has existed for decades, but there is now a backlash, mainly in the United States and Europe against digital platforms such as Amazon, Facebook, and Google. Reforms are underway with, for example, the adoption of new regulations such as the Digital Markets Act in Europe. This trend is now extending to agriculture, with the approval by the US government of USD 89 million to “create a more competitive marketplace for seeds and other agricultural inputs”.

However, we are not seeing a similar wave of reform in low- and middle-income countries.

We believe there is an opportunity, right now, to build on the reform momentum, and shine a spotlight on what is happening in lower-middle-income countries. We need to understand where that consolidation is happening, who is most affected by it, and how we can support reforms underway as well as the regulators trying to enforce their existing frameworks.

A new study maps the situation and offers a tailored & flexible approach

Our new study, presented by Professor Simon Roberts and Thembalethu Buthelezi from the Competition Commission of South Africa, maps pathways to reform competition law and policy in African countries to regulate unfair market power in the food system and empower small-holders and producers.  

Sub-Saharan Africa comprises a large variety of competition regimes, with challenges ranging from a total lack of legislation to a lack of information to assess the effects of mergers. Within this context, tailored solutions and flexible competition regimes that can be adapted to local situations, will be able to address specific challenges and implement the right solutions.

According to Thembalethu Buthelezi, “Food systems are held back by anti-competitive behaviors. We can make a difference with tailored regulatory and institutional solutions to allow for flexible competition regimes that can address the impact on SMEs, the greater use of a regional enforcement action and the use of a market observatory tool to allow for cross-country evidence-based research.”

A discussion identifies challenges and offers pathways to disruption

During our recent webinar, Professor Eleanor M. Fox from New York University School of Law, Doctor Mor Bakhoum from Université Numérique Cheikh Hamidou KANE and the Max Planck Institute for Innovation and Competition and Mr. Chilufya Sampa, former Executive Director of the Zambian Competition and Consumer Protection Commission shared their views on the study and next steps.

A series of challenges were highlighted, including the existing assumptions about market economies and the difficulties in terms of financial and human resources. Doctor Mor Bakhoum noted “We need to address the asymmetry of power between the buyer and the seller in the agro-business sector. In addition to abuse of dominance, the concept of abuse of economic dependence should be explored by enforcement authorities.”

However, the panel offered a series of solutions. According to Professor Eleanor M. Fox, “We need to develop data showing that a market of thriving SMEs is a necessary ingredient of well-functioning food markets and that keeping a clear path for small-scale producers will help fight food scarcity, lower food prices, and help alleviate poverty.” 

This work will require a holistic perspective and in close collaboration with local and regional authorities. “We need to work with authorities to monitor, collect data, and conduct research to improve their capacity to enforce competition law and policy” notes Professor Simon Roberts. Advocacy and data are much needed to convince governments that competition is beneficial to the market.

Chilufya Sampa agrees. “Competition authorities in Africa need to take a holistic approach and consider issues such as poverty, food prices and climate change. We need to support them in demonstrating the negative consequences of anti-competitive behavior.”

To learn more, watch the recording of the webinar here.