Bongani Mdakane | 4 September 2023
SPAR, which is one of the big five retailers in the country, alongside Shoprite, Pick n Pay, Woolworths and Walmart-owned Cambridge Foods, has agreed to end its exclusive leases by the end of December 2026 – thus opening opportunities, and ending a stranglehold on small, medium, and micro enterprises (SMMEs).
This after the SPAR group reached a consent agreement with the Competition Commission on the cessation of long-term exclusive leases this week. The mediation process was conducted under the guidance of Judge Dennis Davis – the chairperson of the Companies Tribunal. The agreement is seen as a victory, giving SMMEs and previously disadvantaged business owners who operate in informal retail markets an opportunity to spread and expand their retail wings.
The agreement is also in response to the recommendations made by the Grocery Retail Market Inquiry (GRMI) and follows a similar consent agreements reached with Shoprite and Pick n Pay covering all national chains that had exclusive lease agreements in place, collectively.
Commission spokesperson Siya Makunga said: “The exclusive lease agreements of Shoprite, Pick n Pay and SPAR covered close to 2 000 shopping malls and convenience centres nationally, and excluded any specialist or general grocery supermarkets from competing for consumers in those malls.
“As more than 50% of grocery shopping journeys are to malls and convenience centres, collectively these leases prevented competition for most consumer purchases.” Makunga also stated that the leases also contributed significantly to the exclusion of SMMEs and historically disadvantaged persons-owned (HDPs) businesses in the grocery sector, where they are under-represented relative to other countries.
“The end of exclusive leases opens opportunities for SMMEs and HDPs in thousands of shopping malls and convenience centres nationally. One of the key issues identified was the impact of long-term exclusive lease agreements on local competition.”
GRMI, on its final report published in December 2019, concluded that long-term exclusive lease agreements limit consumer choice within shopping centres, sustain concentration levels, pose particular barriers to participation by SMMEs and HDPs, while hindering dynamism and innovation in the grocery retail sector.
In terms of addressing these concerns, the commission recommended that national supermarket chains should voluntarily comply with specific measures to phase out exclusive leases within five years.
“As a result of ongoing discussions between the commission and the SPAR group, a consent agreement has been reached that commits the SPAR group to cease enforcing exclusivity provisions for company-owned stores with immediate effect and will not include such provisions in future lease agreements.
“In respect of SPAR group head leases for stores owned by Spar retail members, the SPAR group will cease enforcing exclusivity against SMMEs, HDP specialist stores and HDP supermarkets with immediate effect,” said Makunga.
The agreement will exclude franchisees of national chains in the first year but will cover them thereafter.
“The SPAR group will not include exclusivity provisions in any new head leases and will cease to enforce exclusivity against all competitors by December 2026. The SPAR Group will also actively seek to persuade SPAR retail members to adhere to the agreement’s provisions within 12 months from the date of signature,” he said.
“This final consent agreement concludes the work of the commission in opening the grocery retail sector to competition and participation by all.”
‘Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER’.