Confronting entry barriers in South Africa’s grocery retail sector

Reena Das Nair and Shingie Chisoro
2020
DOI number

#Trade and FDI
#Sub-saharan Africa

Extensive urbanisation along with the associated demand for increased convenience has spurred the demand for fresh food, processed food and household products sold through supermarket chains. From a consumer perspective, supermarkets offer a convenient ‘one-stop-shopping’ experience that can greatly reduce the overall cost of acquiring a typical basket of products due to cost savings derived from economies of scale and scope, among other benefits (Humphrey, 2007; OECD, 2015; Tschirley, 2010). From a supplier perspective, access to supermarket supply chains is important to attain scale, develop capabilities, upgrade, and become more competitive in regional and global markets. Such access can contribute towards the broader industrialisation objectives in South Africa. However, South Africa’s formal grocery retail market is highly concentrated. Four supermarket chains hold over 70% of the market share nationally, with concentration tending to be even more significant in local geographic markets. High levels of concentration limit the options that consumers have in terms of shopping around for the lowest prices, best quality and widest range. Concentration also limits the options that suppliers have in getting the best prices for their products.

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Reena Das Nair

University of Johannesburg

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