Retail group Spar to drop long-term exclusive lease agreements

The entrance to a Spar grocery shop. Picture: African News Agency (ANA)

The entrance to a Spar grocery shop. Picture: African News Agency (ANA)

Published Sep 1, 2023


Pretoria - The Competition Commission and the Spar Group have reached a consent agreement aimed at ending long-term exclusive lease agreements in the grocery retail sector.

The consent agreement follows a mediation process conducted under the auspices of Judge Dennis Davis, the former Judge President of the Competition Appeal Court.

As part of this agreement, the group has committed to end exclusive leases by December 2026, and to opening opportunities to small, medium and micro enterprises (SMEs). This will also include historically disadvantaged people-owned supermarkets.

Spokesperson for the Competition Commission, Siyabulela Makunga, said the consent agreement would be submitted to the Competition Tribunal for confirmation, and ultimately pave the way for greater fairness and competition in South Africa’s grocery retail market to the benefit of consumers across the country.

The Spar agreement is in response to recommendations made by the Grocery Retail Market Inquiry and follows similar consent agreements with Shoprite and Pick n Pay.

Collectively, these cover all national chains that had exclusive lease agreements in place. The exclusive lease agreements of Shoprite, Pick n Pay and Spar covered close to 2 000 shopping malls and convenience centres nationally.

It previously excluded any specialist or general grocery supermarkets from competing for consumers in those malls, Makunga said.

“As more than 50% of grocery shopping journeys are to malls and convenience centres, collectively these leases prevented competition for most consumer purchases.

“These leases also contributed significantly to the exclusion of SMEs and historically disadvantaged-owned supermarkets in the grocery sector, where they are under-represented relative to other countries.”

Makunga said the end of exclusive leases opened opportunities for SMEs and people-owned supermarkets in thousands of shopping malls and convenience centres nationally.

The Grocery Retail Market Inquiry, initiated by the commission, was established to investigate and address features within the grocery retail sector that could hinder competition. One of the key issues identified was the impact of long-term exclusive lease agreements on local competition.

In its final report, published in December 2019, the Grocery Retail Market Inquiry concluded that long-term exclusive lease agreements, among others, limit consumer choice within shopping centres and hinder dynamism and innovation in the grocery retail sector.

To address these concerns, it recommended that national supermarket chains 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 SMEs, historically disadvantaged people specialist stores, and historically disadvantaged-people supermarkets with immediate effect.

This excludes franchisees of national chains in the first year but covers 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. It will also seek to persuade its retail members to adhere to the agreement’s provisions within 12 months from the date of signature.

Pretoria News