- The Competition Commission has released a new report based on its monitoring of food prices.
- A large number of complaints received under excessive pricing regulations during the lockdown, were related to basic food products in retail stores.
- The report says food prices are stabilising, but could be slow to come down.
Nearly 20% of the complaints received under excessive pricing and consumer protection regulations by the end of June were related to basic food products in retail stores, the Competition Commission said on Tuesday.
This amounted to 307 complaints out of a total of 1 600, second only to the number complaints the antitrust body received of excessive pricing on masks and santitisers during the same period – which, combined, accounted for 320 complaints.
The news comes on the back of a report by charity confederation Oxfam, which identified South Africa as an emerging global hotspot for hunger. Some 12 000 people per day could die from hunger across the globe as a result of Covid-19, Oxfam said, while in South Africa, a third of adults said they were going to bed hungry and a fifth said they had lost weight since the start of lockdown due to a shortage of food.
- READ | Thousands may die daily from hunger due to Covid-19 – and SA is a new hotspot
The Competition Commission vowed to crack down on companies engaging in excessive pricing of food.
“The commission will […] remain vigilant and continue to enforce the price gouging regulations to ensure that consumers benefit from the lower costs for food,” it said.
On Tuesday, it released a report on food price monitoring, which it said highlighted its efforts to monitor the pricing of food and fresh produce markets upstream that were subject to initial price increases under lockdown.
According to the commission, the report not only highlighted food price increases during the lockdown, but also underlying patterns driving higher food prices that warranted investigation – among these, high mark-ups on fresh produce and essential foodstuffs.
The commission, which is empowered by the Competition Act to investigate, control and evaluate restrictive business practices, promised early in the lockdown to act decisively against companies found guilty of price gouging during the pandemic.
It has issued several steep penalties during lockdown, including a R1.2 million fine to pharmaceutical retailer Dis-Chem for excessive pricing of surgical masks.
- READ | Dis-Chem fined R1.2 million after losing price gouging case for surgical masks
Within the first month of the lockdown, Competition Commissioner Thembinkosi Bonakele told Parliament that settlements amounting to some R12 million had been secured relating to uncompetitive behaviour, but that some prosecutions were still pending for price increases of up to 900%.
The commission said its food price monitoring report had stemmed from its efforts to contain price gouging on essential foodstuffs in addition to face masks and sanitisers.
According to the report, a combination of rand depreciation and panic buying drove initial price increases at the start of the lockdown, but this impact was exacerbated, in some cases, “by markets not functioning efficiently in addition to instances of price gouging by retailers”.
The commission added:
“Food constitutes 30% of low-income household expenditure and is essential for maintaining a healthy immune system, so containing price inflation is a priority during the crisis.”
The report found that a lack of liquidity in smaller, fresh produce markets made them vulnerable to larger price movements and possible manipulation. Some food suppliers also increased food prices based on a higher cost announcement, but before the higher-cost stock reached their shelves.
The commission was working on stamping out this practice through advocacy and by enforcing regulations, it said.
As for external influences, the depreciation of the rand had a negative impact on food imports, particularly wheat and rice. The rand depreciated from around R15.30/$ on 2 March to over R19.00/$ a month later.
It has since appreciated somewhat, closing at R16.80/$ on Tuesday.
Some improvement on the cards
The news was not all bad: the report also found that, although food prices are typically “quick to go up and slow to come down”, prices are – at least – beginning to stabilise. The commission said:
“The food price monitoring report has also established that the forces that initially drove up prices in food markets have since subsided and prices have now stabilised. This means that some of the initial cost justifications for some food price increases in retail stores no longer exist and consumers should be seeing price reductions coming through from food companies and retailers.”
This is in line with the findings of the Bureau for Food and Agricultural Policy, which said in its most recent report on food price inflation data that the price of chicken, maize, sugar, peanut butter and other foodstuffs had decreased between April and May.
Additionally, South Africa is expecting a bumper maize harvest – its second-largest on record – and, according to agricultural economist Wandile Sihlobo, could also stand to benefit from a positive outlook for rice stocks.
Undercurrents
However, the commission’s report said the monitoring of food markets had “exposed some other underlying features” that were worth investigating further.
Chief among these was a large discrepancy between food market prices and retail prices, which the antitrust body argues raises serious questions about the distribution of risk and profits across the food value chain.
It said:
“Farmers appear to be exposed to almost all the price movement risk but most of the profits lie with agents, distributors, food companies and retailers.”
It added:
“Related to this, the commission is concerned about some of the high mark-ups it has seen for fresh produce and essential foodstuffs in some retail stores, both pre and post the crisis.”
The commission said these mark-ups could be related to exclusive leases prevalent in the retail industry, which it is looking to end through voluntary settlement or litigation.
