Zambia did not sign the African Continental Free Trade Area (AfCFTA) as it was still conducting internal negotiations on some protocols in the agreement, a Zambian official said Thursday.
On Wednesday, 44 African countries signed the agreement to launch the AfCFTA during an extraordinary summit of the African Union (AU) in Kigali, Rwanda.
Zambia's foreign minister Joseph Malanji said Zambia only signed the African Free Trade Area Declaration and not the agreement. He said in a statement that Zambia had negotiated the protocol on goods and services and the dispute settlement mechanism, while the remaining protocols, including on trade competition, investment and the intellectual property, were yet to be negotiated.
The minister, however, said the signing of the declaration shows that Zambia stands with all other African countries in the quest to improve intra-Africa trade.
Meanwhile, Zambia's commerce, trade and industry minister Christopher Yaluma said in the same statement that Zambia will not sign the protocol on the free movement of people as the country was not ready for it.
He said the government would only engage in treaties that had a positive bearing on Zambian people especially the youth and women. The decision to form the AfCFTA was adopted in January 2012 during the 18th Ordinary Session of the Assembly of Heads of State and Government of the AU while negotiations were launched by the AU in 2015.
The AfCFTA was aimed at creating a single continental market for goods and services with free movement of businesses and investments. According to the AU, this will pave the way for the establishment of the Continental Customs Union and the African Customs Union. The AfCFTA could create an Africa market of over 1.2 billion people with a GDP of 2.5 trillion U.S. dollars.
The agreement, after being signed, will be submitted for ratification by state parties before it can enter into force.
AU targets to ensure effective implementation of continental free trade area within one year
The African Union (AU) targets to start implementation of the African Continental Free Trade Area (AfCFTA) within a year, AU Commissioner for Trade and Industry Albert Muchanga has said.
The implementation of the AfCFTA requires at least 22 countries to ratify the agreement to establish the free trade area, Muchanga told Xinhua on the sidelines of the 10th Extraordinary Session of the Assembly of the AU on the AfCFTA on Wednesday.
Forty-four African countries signed the agreement on the AfCFTA during the one-day extraordinary session in Kigali, capital city of Rwanda. The agreement will be submitted for ratification by state parties in accordance with their domestic laws.
"Our target is to ensure that within a year, a minimum number of 22 African countries have ratified the AfCFTA for its effective implementation," said Muchanga.
"After, we shall have a comprehensive plan for the AfCFTA that outlines what topics will be discussed and reviewed during the AfCFTA implementation," he said, adding that these will include among others discussions on tariff reductions to ensure smooth trading under the continental free trade area.
The decision to form the AfCFTA was adopted in January 2012 during the 18th Ordinary Session of the Assembly of Heads of State and Government of the AU while AfCFTA negotiations were launched by the AU in 2015.
The AfCFTA is aimed at creating a single continental market for goods and services with free movement of businesses and investments. This, according to the AU, will pave the way for accelerating the establishment of the Continental Customs Union and the African Customs Union.
Vehicles using the Victoria Falls bridge between Zimbabwe and Zambia will have to pay up to $30 in toll fees from next year, as the two countries say they need to raise funds to maintain the facility.
The two neighbours share the 110 year old bridge, whose maintenance is carried out by the National Railways of Zimbabwe (NRZ) and Zambia Railways (ZR). In a statement, issued on Friday the Emerged Railways Properties, a joint company owned by NRZ and ZR said the toll fees will come into effect from January 1.
“Following the enactment of Statutory Instrument 171 of 2012 in terms of Section 6 of the Toll Roads Act (Chapter 13:13) published in the government gazette dated 2 November 2012, all motorists traversing the Zambia-Zimbabwe border of Victoria Falls are hereby notified the Emerged Railways Properties will commence the collection of Toll Fees for the use of the Victoria Falls Bridge effective 1 January 2017,” the statement reads.
The Road Transport and Safety Agency (RATSA) will collect the fees on behalf of the two governments at the two border posts and entry points to the bridge. Haulage trucks will pay $30 while buses and mini buses which are mostly used by tour operators on a daily basis will fork out $7 and $5 per entry respectively.
Heavy vehicles will part with $10 while taxis and small vehicles below two tonnes will be exempted, according to the statement. The bridge, said ERP in the statement, is key to the socio-economic life of both countries as well as the SADC region hence the need for regular maintenance for it to cope with increasing levels of traffic.
“It is against this background that the government of Zambia and Zimbabwe have resolved to put in place the requisite legal instrument for the tolling of the bridge. The Victoria Falls toll fees will be used specifically for the refurbishment and maintenance of the bridge in order to guarantee its long term existence.”
The bridge was constructed in 1905 by the Cleveland Bridge and Engineering Company and is the gateway to the Sadc region.
Listed beverages manufacturer Delta Corporation, (Delta), says it is set to acquire a controlling stake in Lusaka Stock Exchange-listed sorghum beer company, National Breweries Plc (NatBrew), from its parent firm, Anheuser-Busch InBev SA/NV (AB InBev).
Company secretary Alex Makamure said while the acquisition was still subject to regulatory approvals, the board was optimistic of prospects.
“The entity is being acquired from Heinrich’s Syndicate, a subsidiary of AB InBev…,” he said.
NatBrew is a leading sorghum beer producer in Zambia whose products are marketed under the Chibuku brand.
“The impact of this transaction is currently being determined but is not material for Delta,” Makamure said.
Delta, an associate of Belgian brewer AB InBev, reported that it’s sorghum beer volumes for the quarter to September had gone down three percent on the back of Zimbabwe’s cash shortages.
Delta’s revenue for the second quarter was up one percent on prior comparable period.
- The Source
MINISTER of Transport and Communications Brian Mushimba says the establishment of a national airline is the surest way for Zambians to appreciate Government’s massive investments in the aviation sector.
And Mr Mushimba has brokered an agreement between Zambia Railways Limited and its former employees who retired in 1992, 1995 and 1998 for the payment of about K44 million to those who were underpaid.
In an interview at the ongoing Zambia International Trade Fair in Ndola on Saturday, Mr Mushimba said he is happy with the US$1.7 billion infrastructure investment spread across the Zambian aviation space because it is in line with Government’s vision of ensuring that Zambia becomes a transport hub in the region.
“That’s why we want to establish our own national airline because we don’t want to be like that person who will build a nice garage only for the neighbours to come and park their cars there,” he said.
Mr Mushimba said his ministry is actively looking at the best option in terms of how the national airline will be operated.
Credit: Lusaka Times
The speaker of the Zambian National Assembly, Patrick Matibini, has suspended 48 opposition legislators for 30 days as a punishment for unauthorised absence from the parliament. Their offence? To have been missing for President Edgar Lungu’s state of the nation address in March.
The suspension of the MPs does not come as a great surprise. Hardliners from the ruling Patriotic Front have been pushing for something along these lines for some time. The ruling party was quick to try and disassociate itself from the Speaker’s actions. But, as Zambian commentators have pointed out, the action fits into a broader web of measures designed to intimidate those who question the president’s authority.
The most significant was the arrest of opposition leader Hakainde Hichilema, who remains in jail on trumped up treason charges.
While the latest development in Zambia’s growing political crisis doesn’t come as a shock, it will disappoint those who were hoping that Lungu would be persuaded to moderate his position. Instead, it appears that the International Monetary Fund’s decision to go ahead with a bail out package despite the government’s democratic failings has emboldened the president to pursue an authoritarian strategy.
As a result, a swift resolution to the current political standoff seems unlikely.
Roots of the crisis
For some time Zambia was considered to be one of the more competitive democracies in Africa. But a period of backsliding under Lungu has raised concerns that the country’s inclusive political culture is under threat. The current impasse stems from the controversial elections in 2016 when Lungu won a narrow victory that remains contested by the opposition United Party for National Development.
Hichilema, the leader of the United Party for National Development, has stated that his party will not recognise the legitimacy of Lungu’s victory until its electoral petition against the results is heard in court. The initial petition was rejected by the Constitutional Court. But its decision was made in a way that had all the hallmarks of a whitewash. The UPND subsequently appealed to the High Court. Hichilema’s decision to make his party’s recognition of the president conditional on the petition being heard was designed both as an act of defiance, and as a means to prevent the government from simply sweeping electoral complaints under the carpet.
Until the court case is resolved, the opposition is committed to publicly challenging the president’s mandate by doing things like boycotting his addresses to parliament. In response, members of the ruling party have accused the United Party for National Development of disrespect and failing to recognise the government’s authority. It is this that appears to lie behind Hichilema’s arrest on treason charges.
The suspension of United Party for National Development legislators needs to be understood against this increasingly authoritarian backdrop. It is one of a number of steps taken by those aligned to the government that are clearly designed to intimidate people who don’t fall into line. Other strategies include public condemnation of the government’s critics and proposals to break-up the influential Law Society of Zambia.
Efforts by the president’s spokesman to disassociate the regime from the suspensions have been unpersuasive. The official line of the ruling party is that the speaker of parliament is an independent figure and that he made the decision on the basis of the official rules. It’s true that the speaker and the parliamentary committee on privileges, absences and support services have the right to reprimand legislators for being absent without permission.
Nonetheless the argument is disingenuous for two reasons. The speaker is known to be close to the ruling party, a fact that prompted Hichilema to call for his resignation earlier this year. And the committee’s decisions are clearly driven by the Patriotic Front because it has more members from it than any other party.
The claim that the suspension was not government-led lacks credibility. This is clear from the fact that Patriotic Front MPS have been the most vocal in calling for action to be taken against boycotting United Party for National Development MPs.
IMF lifeline for Lungu
There are different perspectives on the crisis in Zambia. Some people invoke the country’ history of more open government to argue that Lungu will moderate his position once the government feels that the opposition has been placed on the back foot. Others identify a worrying authoritarian trajectory that began under the presidency of the late Michael Sata. They conclude that things are likely to get worse before they get better.
One of the factors that opposition leaders hoped might persuade President Lungu to release Hichilema and move discussions back from the police cell to the negotiating chamber was the government’s desperate need for an economic bail out. Following a period of bad luck and bad governance, Zambia faces a debt crisis. Without the assistance of international partners, the government is likely to go bankrupt. This would increase public dissatisfaction with the Patriotic Front and undermine Lungu’s hopes of securing a third term.
But the willingness of the IMF to move towards the completion of a $1.2 billion rescue package suggests that authoritarian backsliding is no barrier to international economic assistance. In turn, IMF support appears to have emboldened the government to continue its efforts to intimidate its opponents.
IMF officials, of course, will point out that they are not supposed to take political conditions into account and that their aim is to create a stronger economy that will benefit all Zambians. This may be true, but the reality is that by saving the Lungu government financially the IMF is also aiding it politically. Whatever its motivation, the agreement will be interpreted by many on the ground as tacit support for the Patriotic Front regime, strengthening Lungu’s increasingly authoritarian position.
Zambia has often been ignored by the international media. One reason for this neglect is that it’s been comparatively unexceptional, on a continent with more than its fair share of extremes.
Since the reintroduction of multiparty politics in 1991, the country has neither been a clear democratic success story like Ghana or South Africa , nor a case of extreme authoritarian abuse, as in Cote d’Ivoire and Zimbabwe.
Instead, Zambia has occupied a middle ground lacking a hook with which to sell coverage of the country, journalists have tended to steer clear. But in the last few months things began to change. First, the opposition leader Hakainde Hichilema was arrested on trumped up treason charges.
Shortly after, the Conference of Catholic Bishops released a strongly worded criticism of the government that concluded
Our country is now all, except in designation, a dictatorship
As a result, the country has returned to the headlines, and whether one agrees with the bishops’ evaluation or not, one thing is clear: it’s time to start talking about Zambia.
Until now, Zambia’s progress under multi-party politics has been quietly impressive.
Although the level of corruption has remained high, and a number of highly controversial, elections, the country has consistently pulled back from the brink when authoritarian rule appeared a possibility.
Things appeared to be going downhill, for example, when Zambia’s second president, Frederick Chiluba, manipulated the constitution to prevent his predecessor, Kenneth Kaunda, from running against him on the grounds that he was not really Zambian. This strategy was clearly illegitimate. After all, Kaunda had run the country for over two decades.
But, Chiluba’s position was weaker than he understood and he overplayed his hand by trying to secure an unconstitutional third-term. He ultimately left office when his second term expired at the end of 2002.
While Zambians have been willing to defend their new democracy, political leaders have shown a greater willingness to share power than in many nearby states. On the one hand, presidents from a number of different ethnic groups have occupied State House, which has helped to manage tension. On the other, opposition parties have been able to use populist strategies to attract support in urban areas and build effective political machines. As a result, Zambia is one of the only countries on the continent – along with Benin, Ghana, Madagascar, and Mauritius – that has experienced two transfers of power.
Over the last year, though, things have changed.
Zambia’s fall from grace
According to the Conference of Catholic Bishops – one of the most influential bodies in the country – Zambia doesn’t deserve to be called a democracy. Instead, under the leadership of President Edgar Lungu and the Patriotic Front it has become a dictatorship - or getting there.
This statement needs to be taken seriously for two reasons. First, the bishops rarely speak out publicly. Second, many catholic leaders were seen to be sympathetic to the governing Patriotic Front, when it won power under Michael Sata in 2011. So, their actions cannot simply be put down to party political bias.
So what has changed? The bishops identify a number of recent developments as causes for concern.
First, they point to the treatment of opposition leader Hakainde Hichilema. Not only was his arrest conducted in an unnecessarily brutal manner, but the government has not yet provided any evidence to substantiate the treason charge. Instead, it appears that his detention is punishment for refusing to recognise the legitimacy of the president, who Hichilema believes won the last election unfairly.
For obvious reasons, his detention and the question of whether he will be released, has been the focus of recent media coverage. But for the Bishops, Hichilema’s arrest is clearly just the tip of the iceberg. The worries expressed in their statement are less about the fate of the opposition leader, and more about the systematic weakening of the state.
For example, the bishops lament the fact that the Constitutional Court failed to effectively hear the opposition’s election petition, believing the judiciary have “let the people down”. They also note that the politicization of the police force has resulted in the violation of citizens’ rights and that, partly as a result, the media has become entrapped in a “culture of silence”. The Bishops suggest that the political manipulation of these institutions has enabled the government to launch attacks on a number of civil society groups that have dared to challenge its authority, including the Law Association of Zambia.
While the charges against Hichilema may have triggered the Bishops to act, their letter is underpinned by a deeper and broader concern about the declining quality of governance under President Lungu.
This is not the first time that a Zambian president has sought to consolidate their authority my manipulating state institutions. Nor is it the first time that opposition leaders have been arrested, or civil society groups intimidated. In the recent past, these moments of high political tension have often been resolved peacefully and it’s not impossible that a similar thing will happen this time.
For example, the president may decide to release Hichilema and to pull back from the prohibition of the Law Society of Zambia in the wake of considerable criticism. If the recent spate of attacks has been designed to intimidate his rivals, Lungu may feel that his goal has already been achieved and that he has little to gain by following through with his threats.
But even if this were to happen, it’s unlikely that it would signal a period of a more accountable government, or that Lungu will cede his quest to remain in office. Many things have changed since Chiluba failed to secure a third term in office almost twenty years ago.
First, key civil society groups such as the trade unions have been weakened by privatisation, informalisation and unemployment.
Second, the Constitutional Court that’s responsible for interpreting the constitution was handpicked by Lungu, and is highly unlikely to oppose him.
Third, Lungu’s case is more complicated than Chiluba’s. In 2001, the second president had served two fill terms in office and wanted one more. Today, Lungu is arguing that he should be allowed to have a third term because his first period in office did not count, as he was just serving out the final year of Michael Sata’s term following his untimely death in office.
This reading of the constitution is highly questionable. The clause that stipulates that a period in office only counts as a full term if it’s longer than three years is limited to a set of cases that doesn’t include the way that Lungu actually came to power. But, it is less clear-cut than Chiluba’s power grab.
All of this means that Lungu is likely to get his way. But, his third term will not come without a cost. Opposition protests are inevitable, as is some civil society criticism. If past form is anything to go by, Lungu’s government will respond with threats and intimidation, fuelling public fears that Zambian politics has become significantly more violent since the 2016 election campaign. Given this, the Bishops’ recent letter is unlikely to be their last, and we need to talk about Zambia for some time to come.
Zambia’s government has just banned the imports of some farm produce as a way of promoting the growth of the agriculture sector. The Conversation Africa’s Samantha Spooner asked Calestous Juma about the impact this will have on African countries and their agricultural sectors.
Which African countries are the biggest importers of fruit and vegetables and how much do they rely on to meet local demand?
In 2013, the import value of all fruit and vegetable categories for the African region was about $1.2bn. However, the trade tends to be localised in countries that have poor infrastructure. They have short shelf lives so it’s important to get them to the market quickly. Consumers are also discerning and avoid buying produce on the edge of being spoiled. Many of them may not have refrigeration at home so are selective in what they buy.
Poor infrastructure means that countries such as Nigeria end up being major tomato importers because they can’t keep up with the demand. Over the last 12 months Nigeria imported 189.5 tons of tomato paste. This is despite the fact that they have states with ample land for growing tomatoes close to major urban centres such as Lagos.
The importance of investing in infrastructure, as I argue in The New Harvest, has significant implications for food production, storage and distribution.
But poor infrastructure isn’t the only driver of imports, especially of fruit. Other factors such as taste, widely available variations among nations – like India – in fruit production, and seasonal availability are important forces behind the globalisation of the fruit trade.
Advances in freight technology and expansion of shipping have also made it possible for exporters to achieve economies of scale that out compete local producers. China, for example, is emerging as a major fruit exporter partly because of its world class capacity in shipping and logistics.
Is banning imports a good way to boost the local agricultural sector? Has it worked elsewhere?
Banning imports is a blunt tool for stimulating local production. It often triggers unnecessary trade reprisals unless there’s evidence of health concerns. And they’re a poor substitute for measures such as investments in local infrastructure that would enable local producers to compete favourably.
But it’s also important to take into account the political context that leads to bans. Countries like Zambia, for example, don’t have a long agricultural tradition and are under pressure to protect the emerging sector.
Zambia historically specialised in mineral exports and relied on food imports from neighbouring countries and international markets. It sought to diversify it’s economy when global copper markets tanked late last century and the economy collapsed. As a recent entrant into the green vegetable export market, Zambia has previously faced phytosanitary barriers to its exports.
Given the circumstances it’s clear why the government would want to protect local producers. But the ban is unlikely to result in the desired outcomes except to provide relief for existing producers. Bans are usually not permanent and so do serve as incentives to encourage new investment that may take a long time to show results.
Are international trading rules inclusive enough to accommodate a country’s different needs and pressures?
While I think bans don’t work in many cases, international trade rules cannot operate well without any consideration for their implications on ordinary people.
International trade can be designed as a positive-sum game. And it should be. But it will continue to be challenged when it carries the seeds of irreparable loss of livelihoods. Of course we need international trade, but it needs to be guided by different ethical stands such equity so countries are not pushed into continuous conflict because of the fear of being excluded from the global market.
4. What impact does importing agricultural produce have on local agricultural sectors?
Imports are not necessarily bad in themselves. They are part of a global system that’s theoretically built on the principle of reciprocity. This includes the expectation of reasonable balance of trade between the partners. Quite often bans are motivated by imbalances in trade relations.
Banning imports simply because one is seeking to protect local agriculture – and without just cause – is generally a poor approach to achieving food security. In many cases, imbalances in agricultural trade exist because African countries haven’t made the necessary investments – such as storage facilities and capacity building in international trade practices – that allow them to become important players in the global economy. Therefore, imports and suppressed local production tend to reinforce each other.
Even when countries increase production they still have to contend with the challenges of breaking long-term import contracts or violating international trading rules.
5. Have other African countries introduced similar bans?
Many countries tend to introduce bans to reduce the amount of foreign exchange used for imports, not necessarily to stimulate local production. When foreign exchange earnings improve they tend to reverse the bans. This often affects those local businesses that may have thought the bans would benefit them.
It’s therefore important to first put in place policies and incentives that promote local production. Their effective implementation often makes the need to introduce bans unnecessary.
Nigeria has previously imposed bans on imports. One example was barley. This helped to stimulate the use of sorghum to produce beer. But the motivation was foreign exchange management, not necessarily to promoting innovation in brewing.
In another Nigerian case, foreign exporters of wheat stifled efforts to introduce bread that was made with 40% cassava. The government didn’t ban wheat imports but a bill put to the legislature to require the blend was starved of support and defeated. Such is the power of food import lobbies.
In this case the initiative would’ve stood a better chance of success if it had found a way to extend benefits to those who were likely to lose from reduced wheat imports. It’s such losers who become the sources of resistance to new ideas, as I argue in Innovation and Its Enemies.
6. Apart from banning imports, what should African countries be doing to grow their agricultural sectors?
Banning imports may protect a few existing producers but in the long run it should not be considered as a tool to grow the agricultural sector. The focus should be on laying foundations for agricultural productivity, starting with infrastructure and working up the value chain to developing agro-industries.
Without reliable roads, power supply and irrigation there is little chance that Africa will radically transform its agriculture. Much effort is going into scientific research, which is commendable. But the gains from productivity will have little impact if produce can’t reach the market because of poor infrastructure and a lack of competence in logistics.
And more than anything else Africa needs agricultural engineering. Today Africa exports less food than Thailand. The immediate goal should be to learn how Thailand became an agricultural force and apply the lessons to regional trade.
Africa will become a more serious international player when it can trade effectively with itself. It’s like the world of football. Those countries that don’t have strong regional leagues tend to shine in the first rounds of the World Cup tournament then they flounder.
-This article is part of a series of studies titled “barriers to entry”, specifically looking at the expansion of regional supermarket chains in southern Africa. The article draws from studies that look at the spread of supermarkets in the region and how the market power of large firms in different sectors can hold back economic development.
Supermarkets are a key route to market for many suppliers of food and household consumable products. The growth of supermarket chains in southern Africa presents important opportunities for suppliers, as it potentially opens up much larger regional markets for them. Supermarkets can therefore be a strong catalyst to stimulate suppliers in food processing and light manufacturing industries in southern Africa.
But even the most efficient suppliers with competitively priced, high-quality products are unlikely to succeed if they can’t get their products to consumers. Here, large supermarkets play a key role. Onerous requirements and exertion of buyer power by large supermarket chains can result in small- and medium-sized suppliers and entrepreneurs failing to enter and participate in the economy.
We examined the obstacles to accessing shelf space in supermarkets in Botswana, South Africa, Zambia and Zimbabwe. The research revealed a range of costs that suppliers incur even before a single unit of their product is sold off supermarket shelves in each country.
Supplier development initiatives have been put in place by supermarkets and governments. But these have had limited success because they are restricted in scale and scope, are largely ad hoc, and don’t have a regional development perspective in mind.
There is a need for more co-ordinated, sustainable and regionally focused interventions to increase the participation of suppliers in supermarket supply chains. These should aim to reduce barriers to entry by, for example, curbing supermarket buyer power and building capabilities of suppliers.
The formal South African supermarket industry is concentrated, with only a handful of large chains holding more than 70% of the national market share. South African supermarket chains also have a strong and growing presence in each of the other countries assessed, although recent years have seen the emergence of other African and global chains too.
Large supermarket chains therefore have considerable buyer power, and are often able to control pricing and trading terms with suppliers. This can include a range of fees such as listing or support fees paid by suppliers to get their products listed in supermarket books. These fees can be prohibitive for small suppliers. Estimates of listing fees in South Africa range from US$350 to $3,500 per year for a single product line of a basic food item on the shelf. They can go as high as $17,000 to $20,000 for prime till positions for products like sweets and lollipops for a limited time period.
In Zimbabwe, listing fees can be up to $2,500 per product line, with $50 to $100 for the introduction of additional new product lines by the same supplier. Suppliers are also often required to offer supermarkets settlement discounts for paying them within the number of days stipulated in the trading terms. This varies depending on the supplier.
Long payment periods put considerable pressure on suppliers’ cash flow and working capital which is problematic particularly for small suppliers. Local suppliers in Zambia raised this as a key reason for non-participation in supermarket value chains although it was a concern in all the countries studied.
Over and above the advertising costs faced by suppliers themselves in creating brand awareness for their products, supermarkets require them to make a host of additional payments. These can include:
discounts off the purchase price for indirect advertising;
contributing towards promotions. Our research showed that it can cost anything from $2,500 to $7,000 to promote a single product line as a contribution to the costs of the supermarket advertising through TV, newspapers and flyers; and
paying to participate in different promotions held by supermarkets such as Easter and Christmas promotions.
A range of other fees also apply, varying by supplier and according to industry. These include general discounts, fixed or variable rebates based on sales volumes, transport discounts and swell or wastage allowances.
Cumulatively, the various fees can add up to at least 10-15% off the price of the product sold to supermarkets, placing considerable strain on supplier margins.
General access to good shelf space often comes at further costs. It is critical for successful sales that products are displayed where shoppers can easily see them. Eye-level shelf space is often taken up by dominant suppliers.
Similarly, access to refrigeration space is important for suppliers of cold products such as soft drinks, ice creams and frozen food. There have been competition cases [globally]
((http://ec.europa.eu/competition/antitrust/cases/dec_docs/39116/39116_258_4.pdf; http://www.ccm.mu/English/Documents/Investigations/INV019-Final%20Report%20of%20Undertaking-NC.pdf) and in South Africa that have recognised the harm to competition of dominant suppliers imposing exclusivity requirements on fridge space.
Over and above legal requirements such as compliance with national standards, food safety, labelling and packaging requirements, suppliers also have to adhere to private standards imposed by supermarkets. These can include barcoding and specific packaging requirements as well as sustainability criteria and religious requirements (such as halal and kosher certicfications).
These can also include higher accreditation standards which often involve on-going audits at the supplier’s cost.
Codes of conduct between suppliers and supermarkets can be a useful way to control the exertion of buyer power.
In the UK, for example, the Groceries Supply Code of Practice was set up specifically to oversee the relationship between supermarkets and their suppliers following an inquiry by the former Office of Fair Trading.
Similarly, in Ireland and Spain, there are plans to institute voluntary or mandatory codes of conduct in the grocery sector to govern commercial relations between suppliers and supermarkets in the food chain. We recommend that such codes also be set up in southern Africa. Given the multinational nature of supermarkets in the region, these codes can be harmonised across the region.
Supermarkets can also play an active role in building the capabilities of suppliers. Almost all supermarkets in South Africa have some form of voluntary supplier development program in place. In some instances, large supermarkets have been mandated to set up supplier development programs. For example, as part of the merger between Walmart and Massmart, the merged entity was required to set up a supplier development fund. Around $16.7 million was allocated to be spent over five years to develop suppliers.
Some aspects of the program involving farmers were unsuccessful. But there have been positive outcomes for some black entrepreneurs in food processing. One beneficiary, Lethabo Milling, a new entrant producing maize meal, received around $110,000 towards refurbishing his plant. And the company was able to secure a loan from a commercial bank on the back of a guaranteed route to market through supplying Massmart stores in South Africa. Lethabo Milling also received additional support through training, waived listing fees and fast-track payments.
Successfully developing supplier capabilities in the region requires a much larger, long-term and commercially oriented approach by supermarkets in partnership with governments. This can be done through the creation of supplier development funds similar to the Massmart/Walmart programme. Funding can also come from fines levied by the competition authorities in abuse of dominance or cartel matters in each country.