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The Competition Commission has launched an investigation into whether Premier Group’s decision to close its fruit canning factory at Tulbagh, Western Cape breaches merger conditions attached to its recent acquisition of Rhodes Food Group (RFG). Farmers warn the move could trigger thousands of job losses and devastate South Africa’s canned fruit industry.The investigation comes just months after the Competition Tribunal approved Premier’s takeover of RFG, subject to conditions designed to protect jobs and support public interest initiatives. Premier undertook not to retrench employees as a result of the merger for three years after implementation and committed to increasing spending on enterprise and supplier development over the same period.Competition Commission spokesperson Siya Makunga confirmed that the watchdog was examining whether Premier’s planned closure of Fruit Products Western Cape (FPWC) in Tulbagh has implications for those merger commitments.“The commission recently became aware of the potential closure of Premier’s fruit products business in the Western Cape, Tulbagh. Please note that the matter is now being investigated by the commission, and the commission will determine the appropriate steps to take once it has concluded its investigation of the matter,” Makunga told Business Times.While the commission has not indicated whether it believes Premier has breached the merger conditions, its investigation raises questions about whether the planned retrenchments are merger-specific or stem from operational circumstances unrelated to the acquisition.Premier this week confirmed that it had initiated a section 189 consultation process with affected employees and recognised labour representatives over the proposed closure.“FPWC is no longer economically sustainable in its current form,” Premier said.It attributed the decision to declining global demand, changing export market conditions, pricing pressure, rising input costs and the need for greater scale in an increasingly competitive international industry.About 90% of the factory’s canned fruit production is exported, leaving the business heavily exposed to weakening international demand.Premier argues that the challenges are structural rather than company-specific, saying South Africa’s canned fruit industry is unlikely to sustain two sub-scale canning operations in the long term.The company said it had explored alternatives, including seeking a buyer for the business, reducing operating costs and assessing other options before deciding to begin the consultation process.Premier rejected suggestions that the proposed closure is linked to its takeover of RFG.“This is a separate business sustainability matter driven by the standalone operating position of FPWC and the structural pressures facing the canned fruit industry. It is not related to the Premier/RFG merger or any merger-specific conditions,” the company said.But farmers have strongly disputed that version, accusing Premier of abandoning longstanding contractual commitments without consultation and giving producers only a few months’ notice before the next harvesting season.Anthony Dicey, chair of the Canning Fruit Producers Association, said growers had already spent millions of rand preparing orchards for the next season when they learnt of the proposed closure.“We’ve refinanced quite a substantial part of our next production costs and they’ve now given us three months’ notice,” he said.Fruit growers make long-term investments because orchards typically remain productive for around 20 years, making it impossible to switch quickly to alternative crops, Dicey said.“Premier never engaged with any producers. They just announced it at a meeting. There was no consultation.”Producers want Premier to honour its existing contracts by keeping the factory open for at least another season while the industry searches for sustainable alternatives.“We want Premier to keep the factory open for at least another year. We need time to make alternative arrangements.”According to Dicey, suggestions that Langeberg Foods could absorb fruit currently destined for Tulbagh are unrealistic.“Langeberg Foods won’t be able to accommodate all this fruit that is suddenly going to be lying there without a home.”Langeberg is a canning business that operates in Ashton in the Western Cape and was sold by Tiger Brands a year ago to a consortium that includes Norwegian finance institution, fruit producers from across the Western Cape and a community trust. Charl Herbst, a peach producer who has supplied the business for about two decades, said the decision threatens the survival of many farming operations.“I’ve got a two-year rolling contract where they must give me two years’ notice,” he said.“If Premier keeps that factory running for the next two years while honouring their contracts, it will not mean the end of Premier. But for me as a producer, it might mean my end.”The factory annually processes approximately 55,000–60,000 tonnes of fruit, purchases around R300m worth of fruit from producers, generates exports worth R1.0–1.2bn, and supports approximately 200 commercial producers, 2,000ha of orchards, around 3,500 permanent and seasonal factory jobs, and more than 2,000 permanent farm workers. Its economic impact extends well beyond agriculture into transport, engineering, packaging, sugar suppliers, retailers and numerous rural businesses throughout the Witzenberg region.Farmers also disputed Premier’s assertion that all available options had been explored before the decision was taken.“They say they’ve looked at all options. That is not true because they never spoke to the producers,” Herbst said.The Tulbagh Canning factory processes about 60,000 tonnes of fruit, purchases around R300m worth of fruit from producers and generates exports worth an estimated R1.2bn. Producers’ concerns echo those of local communities, who fear the closure of one of Tulbagh’s largest employers could severely damage the regional economy.Business Times
