In a recent brief report, the Bureau for Food and Agricultural Policy (BFAP) pointed out that, according to the available data, the agricultural sector was one of the South African economy’s least concentrated sectors. And while agro-processing was much more concentrated than agriculture itself, it was still far from being one of the most concentrated sectors of the economy.
BFAP established market concentration in an economic sector by taking the combined income of the 20 biggest enterprises in that sector and comparing it to the total income of all enterprises in the sector. The data was obtained from industry surveys conducted by Statistics South Africa. The inter-sectoral comparison excluded the key utilities – electricity, gas and water – because of a lack of data.
The bureau established that the level of market concentration in agriculture was 12%, making it, with financial services (also 12%), the least concentrated economic sector of all. This despite the fact the data included corporate producers of eggs, poultry and sugar. Of course, subsectors within agriculture might be more concentrated than the overall sector, and levels of concentration might be increasing. “[F]urther analysis is required to establish either of these two points,” noted BFAP.
“Agriculture with its upstream and downstream linkages consists of more than just the input supply industries (fertiliser, seed, agrochemicals, mechanisation services, etc.) and the food and beverage sector,” it explained. “In reality, the tentacles of the industry are spread throughout the rest of the economy and encompass elements of the transport and storage sectors, and the retail, personal services, financial services, wholesale, and accommodation sectors, to name just a few. These all need to be taken into consideration when assessing the extent of market concentration.”
The level of concentration in agro-processing is 52%. This is, however, only marginally higher than the concentration levels for the retail sector (51%) and “other manufacturing” (also 51%). And it is far below the levels for mining (73%), fisheries (78%), forestry (80%) and postal services and communications (86%). The other sectors analysed, (and their levels of market concentration), were wholesale (17%), motor trade (26%), food retail (27%), construction (28%), transport and storage (32%), personal services (33%) and accommodation (41%).
“Clearly, both agriculture and the agro-processing sector are not the most concentrated sectors in the economy,” pointed out BFAP in its report. “And concentration is driven by [State-owned entities] and other resource-based industries (mining, forestry and fisheries).”