By Nqobile Dludla

JOHANNESBURG, June 18 (Reuters) - South Africa's

competition watchdog has uncovered barriers to entry, distorted

competition and price mark-ups in its fresh produce market,

according to a provisional report released on Tuesday after an

inquiry.

Last year the Competition Commission launched the Fresh

Produce Market inquiry in order to examine whether any features

in the fresh produce value chain impede, restrict or distort

competition in the market.

Detailing the findings of the preliminary report, Deputy

Commissioner Hardin Ratshisusu said the inquiry found some

instances of high mark-ups by retailers which have been

sustained over a period of time, which the Commission found to

be an indictor of a lack of competition.

The inquiry also noted that there is still slow progress in

integrating historically disadvantaged small-to-medium

enterprise farmers into various retailers' supply chains.

The agricultural sector contributes approximately 2.5% of

South Africa's gross domestic product, while the market size of

the domestic fresh produce market is estimated at over 53

billion rand ($2.93 billion) annually.

Ratshisusu said prices of fresh produce "are not transparent

enough such that they allow consumers to reasonably compare

prices in-store and across retailers," because prices are not at

per kilogram but per unit basis.

In the agrochemical sector, the inquiry found that some

firms engage in practices or conduct that may distort

competition, such as the use of territorial allocation in their

distribution agreements with retailers.

In the seeds industry, the inquiry found instances where a

firm appears to be involved in charging farmers "what could be

characterised as exploitative prices."

To address distortion in the market, the inquiry identified

recommendations and remedial actions.

On variety for potato seeds, it recommended that Simba,

owned by PepsiCo Inc ( PEP ) should make available its potato

variety FL2006 gene material to the Agricultural Research

Council for preservation and so that it is available to any

member of the public.

PepsiCo ( PEP ) patents its potato seed variety used to make its

popular Simba potato chips.

Some recommendations included a new fund to assist new

entrants selling fresh fruits and vegetables in shopping

centres, measures to support the local fertiliser industry and

that Bayer remove the territorial clauses from its

distribution agreements with appointed distributors.

It also proposed that African Rainbow Capital

should divest its shareholding in either Subtropico or RSA

Group, which both specialise in sales and marketing of fresh

produce on behalf of producers.

($1 = 18.0631 rand)