A Blurred Line That May Be Costing the Industry
Manufacturers should manufacture. Retailers should retail. It sounds simple enough, but in South Africa's furniture sector, the lines between these roles have been blurred for decades.
Steinhoff International offered the most documented example of deep vertical integration: manufacturing operations, retail brands, raw material supply through PG Bison, and logistics via Unitrans, all housed under a single corporate roof. That level of control across the entire value chain raises serious questions about fair competition.
The numbers sharpen the concern. South Africa's furniture manufacturing sector employs approximately 30,800 workers, and more than 90% of companies in the sector are SMMEs. Yet large retailers collectively hold around 80% of the local market share. The playing field is not level.
This article presents a structural reform proposal for debate. We argue for a clearer separation between manufacturing and retail, then test that argument honestly against its own weaknesses. It is a starting point for a conversation, not a finished policy.
What the Current Framework Already Says
South Africa's Competition Act already addresses some of these concerns, though it stops short of prescribing specific structural remedies for the furniture sector.
Section 5(1) of the Competition Act prohibits vertical agreements that substantially prevent or lessen competition, unless the party involved can demonstrate that pro-competitive gains outweigh the anti-competitive effect. This is the "rule of reason" test: vertical integration is not automatically unlawful, but it can be challenged when the harm to competition is clear.
Section 9 goes further for dominant suppliers. It prohibits price discrimination between purchasers of similar goods or services where the effect is to substantially prevent competition or impede the ability of small and medium businesses to sustain themselves.
The Department of Trade, Industry and Competition (DTIC) published Draft Vertical Restraints Regulations in June 2024, proposing a more detailed framework for assessing manufacturer-retailer agreements under Section 5. These regulations address restrictions on passive sales and selective distribution networks, signalling that the regulator is paying closer attention to how supply chain relationships affect competition.
Running alongside these legal developments, the Furniture Industry Master Plan (FIMP), developed by the DTIC and the South African Furniture Initiative (SAFI), is now in active implementation. Built around six strategic pillars, including localisation, fair import practices, and improving the manufacturer-to-retail value chain, the Master Plan treats the relationship between manufacturers and retailers as a structural issue worth governing carefully.
Retailers are recognised as essential participants in this process. The Lewis Group, for example, is a formal Master Plan partner alongside manufacturers and trade unions. Parliamentary engagement on the Master Plan confirmed that furniture retail is "a key means by which local products reach consumers."
Existing law and policy are clearly pointing toward clearer rules for the manufacturer-retailer relationship. What they have not yet done is prescribe exactly what those rules should look like.
The Reform Proposal: Separation, Registration, and Equal Terms
Here is a concrete proposal worth debating. Furniture manufacturers should register and operate formally as manufacturers. Retailers should register separately, with a qualifying criterion that they maintain a commercial office or showroom. Two distinct roles, two distinct registrations.
At the director level, the same individuals should not be permitted to control both a manufacturing entity and a competing retail entity simultaneously. This is a structural remedy to a structural problem. When the person setting wholesale prices is also the person setting retail prices for a competing shop, the independent retailer down the road does not stand a chance.
Under this framework, manufacturers would sell exclusively through registered retailers on equal wholesale terms. The ability to offer preferential pricing to favoured buyers, or to bypass the retail channel entirely, would be removed. Substantial penalties should apply to manufacturers that sell directly to end users in breach of these rules, with enforcement channelled through the Competition Commission.
Why does this matter? Because equal wholesale terms would give independent retailers a genuine opportunity to compete on what they actually control: service quality, product range, customer relationships, and after-sales support. Research shows that the majority of independent South African retailers buy from wholesalers rather than directly from manufacturers, placing them at an inherent cost disadvantage against large retailers who negotiate lower prices at source.
A clearer separation would also incentivise retailer investment. When a retailer knows they can access the same products at the same base price as their competitors, it makes commercial sense to invest in showrooms, trained staff, and long-term customer service infrastructure. That investment supports a healthier retail channel for everyone, including the manufacturers who depend on it.
There are international precedents for this kind of approach. Under European competition law, selective distribution systems can legitimately require retailers to maintain physical premises as a qualitative criterion. The US Federal Trade Commission applies a rule-of-reason approach to similar vertical restraints. Neither system treats separation as radical; both treat it as a tool for maintaining fair competition.
The link to broader policy objectives is direct. The DTIC's 2024 Draft Vertical Restraints Regulations reference B-BBEE and SMME inclusion objectives. Protecting independent retailers is not just a narrow competition metric; it serves a constitutional and economic development purpose.
Testing the Proposal: Where It Could Go Wrong
Any honest proposal has to confront its own weaknesses. This one has several.
Would mandatory showroom requirements exclude legitimate small retailers? South Africa's e-commerce sector now accounts for 10% of total retail sales, and that figure is growing. Online-only furniture retailers are a real and growing part of the market. Under EU competition law, outright bans on online sales are treated as hardcore restrictions of competition. A mandatory physical showroom requirement could unfairly shut out legitimate digital-first businesses that serve customers well without a shopfront.
Could equal wholesale pricing create its own problems? Mandating identical terms for all registered retailers could conflict with legitimate volume discounts. A retailer ordering 500 desks a month has genuinely different logistics and warehousing costs than one ordering five. Forcing identical pricing regardless of volume may create compliance complexity under Section 9 of the Competition Act and could discourage the kind of scale that drives down costs for end users.
Would restricting direct sales raise prices? Removing the manufacturer-direct channel could eliminate a competitive distribution option, particularly for government departments, bulk procurement teams, and tender buyers who currently benefit from manufacturer pricing. If every sale must pass through a registered retailer, the additional margin could push end-user prices upward.
What about small manufacturers? With over 90% of furniture manufacturers being SMMEs themselves, a blanket ban on direct sales could harm the very small businesses the reform aims to protect. Many small manufacturers rely on direct cash-flow relationships with buyers to survive. Cutting off that revenue stream could be fatal for businesses already operating on thin margins.
The Competition Commission's 2025 shift toward inclusion and accountability reframes these tensions around broader constitutional values, but it does not automatically resolve them. Trade-offs remain. Economic growth is the intended outcome of this reform, not a guaranteed result. Any implementation would need piloting, monitoring, and adjustment.
What a Workable Framework Might Actually Look Like
A binary separation may be too blunt. A more practical approach would be a tiered registration system: manufacturers, retailers, and a hybrid "manufacturer-retailer" category with strict conditions and full transparency requirements.
The hybrid category should require public disclosure of all related-party relationships and be subject to enhanced Competition Commission scrutiny. This addresses the director-level conflict-of-interest concern without imposing an outright ban that could be challenged as disproportionate.
The showroom requirement should be replaced with a broader "qualifying commercial presence" test. That could mean physical premises or a verifiable online retail operation meeting defined service standards, including product display, returns handling, and customer support. This accommodates legitimate e-commerce players without opening the door to shell operations.
On pricing, equal wholesale terms should apply as a floor, not a ceiling. Manufacturers could offer volume-based discounts above a transparent, published baseline, provided the same volume thresholds are available to all registered retailers equally. No hidden deals, no preferential arrangements.
Office Stock Group, operating as a one-stop supplier since 2007 with over three decades of founder industry experience, is the kind of established independent retailer this framework is designed to protect and enable. Businesses that invest in staff, showrooms, stock, and long-term customer relationships deserve to compete on a level playing field.
The Furniture Industry Master Plan's parliamentary engagement and the DTIC's Draft Vertical Restraints Regulations together provide a ready legislative vehicle for piloting these ideas. The infrastructure for reform already exists. What is needed is the will to use it.
A Debate Worth Having, and Acting On
The current structure of South Africa's furniture sector concentrates power in ways that disadvantage independent retailers, suppress SMME investment, and may be slowing the sector's recovery. The proposal outlined here is a starting point for industry debate, not a finished policy. The tensions identified are real and must be resolved through genuine consultation.
We call on the DTIC, SAFI, the Competition Commission, and all industry stakeholders to use the Master Plan implementation process and the Draft Vertical Restraints Regulations as the vehicle for this conversation.
South Africa's furniture sector employs nearly 31,000 people and was the continent's second-largest furniture exporter in 2021. The structural conditions for a thriving industry exist. The rules of engagement need to catch up.