Table of Contents
Key Points
- Patrice Motsepe's ARC faces antitrust pressure – South Africa’s Competition Commission calls for divestment in fresh produce market.
- ARC’s market influence under scrutiny – Cross-shareholdings in RSA Group, Subtropico hinder competition, control up to 90% of key commodities.
- Despite challenges, Motsepe's African Rainbow Capital reports strong financial growth with a $186 million boost.
African Rainbow Capital (ARC), the investment group founded by Africa's first Black billionaire Patrice Motsepe, faces a critical regulatory hurdle. South Africa’s Competition Commission has recommended that ARC divest from one of the country’s largest fresh agricultural produce agencies after a two-year investigation into potential anti-competitive practices.
The investigation focused on ARC’s cross-shareholding in RSA Group and Subtropico, two companies that together hold substantial control over South Africa's key fruit and vegetable markets, including staples like potatoes, apples, bananas, onions, and tomatoes. The regulator's final report, released Monday, highlights that ARC's interest limits competition, further consolidating power within the South African agricultural sector.
Concentration of market power
South Africa’s fresh produce market is dominated by just four companies, with RSA Group and Subtropico playing a significant role in price-setting and distribution. The Commission emphasized that ARC’s dual investment in these companies impedes fair competition, which is essential for the country’s agricultural sector.
“ARC’s cross-shareholding in RSA Group and Subtropico impedes, restricts, or distorts competition,” said Hardin Ratshisusu, Deputy Commissioner of the Competition Commission, at the release of the final report.
The Competition Commission is calling for immediate market reforms, recommending that ARC either divest from one of its holdings in RSA Group or Subtropico within six months. If the company does not comply, the regulator urges the Competition Tribunal to intervene and enforce the divestiture.
Proposed market reforms
Beyond the recommendation for ARC's divestiture, the Commission’s inquiry revealed a broader issue within South Africa’s fresh produce sector. The dominance of just four companies in controlling the market raises concerns about fair pricing and equitable opportunities for emerging farmers. To foster a more competitive and inclusive market, the Competition Commission has proposed 31 reforms aimed at addressing these systemic issues.
The reforms are designed to reduce market concentration, ensure better access to distribution channels for smaller players, and create opportunities for new entrants, particularly emerging farmers. These recommendations align with ongoing efforts to enhance market fairness and empower less-established agricultural producers.
Patrice Motsepe’s leadership amid legal challenges
Motsepe, whose net worth stands at $2.7 billion, remains firmly at the helm of ARC, an investment group that he founded in 2015 as a subsidiary of UBI. The company has expanded rapidly, targeting sectors historically underrepresented by Black investors, and has become a formidable force in industries like fintech and telecommunications.
Despite regulatory pressures, ARC’s financial performance remains robust. In the first half of 2024, ARC reported a R3.29 billion ($186.18 million) increase in net asset value, pushing its valuation above $1 billion. This growth is seen as a testament to Motsepe’s strategic vision and the company's resilience amid legal and regulatory challenges.
However, ARC is also contending with ongoing litigation, including a $195 million lawsuit filed by Tanzania’s Pula Group over alleged contract breaches in a mining venture. Despite these setbacks, Motsepe's leadership continues to drive the company forward, maintaining a clear focus on long-term growth and expansion in Africa’s emerging markets.
