The South African Competition Commission has noted a sharp increase in South Africa’s staple foods – which may be at risk of overcharging by retailers.
The commission’s latest Essential Food Price Monitoring Report identified specific red flags with South African sunflower oil and bread prices, saying that consumers “might be facing opportunistic price increases” in these two categories.
According to reposts, the commission listed the following factors as several more concerns that currently face South Africa’s food markets and value-chains:
- Wide farm-to-retail spread in prices
- Large price differences between regions for basic fresh produce
- Growing margins at the processor and retailer level
- The trend of price inflation that started with the pandemic and has been exacerbated by supply chain constraints and the Eastern European conflict for South Africa as a net importer of sunflower seeds
The Monitoring Report noted that bread as a staple food for consumers has become a point of concern as the wholesale-to-retail price of bread has increased significantly over time.
News 24 reports that in January 2022, the retail and producer prices of white bread were R15.46 and R11.31 respectively – a difference of R4.16. A mere six months later there’s an increased rate of 12% and 10% as the retail and producer price of white bread stood at R17.41 and R12.42 in June – a difference of R4.99 according to the commission.
The retail and producer prices of brown bread in January were R13.99 and R11.67 – a difference of R2.32. By June, the retail and producer price of a loaf of brown bread became R15.90 and R12.73 – a difference of R3.18 indicating a respective 13% and 9% price increase rate.
Among other staple goods, sunflower oil is another point of concern as sunflower oil processor prices have also increased by far more than sunflower seed prices this year, resulting in widening retail margins.
The commission found that sunflower processing prices have increased by 72% and retail prices have climbed by 36% in 2022, indicating that retailers have absorbed some of the increase.
It said that while this may indicate increases in the cost of retailers, evidence suggests that wholesale cost decreases in the past have not been passed onto consumers by retailers, and this is the resulting source of margin growth and opportunistic behaviour during periods of inflation.
Stats SA’s latest consumer price information shows that bread, fats and oils, and cereals currently carry the highest inflation rate at 13.7% and 36.2% respectively.
“This is commonly referred to as the ‘rocket and feather effect’ whereby prices are quick to increase and slow to decline where there is cost inflation in the value chain,” says the commission.
South African unions SAFTU and COSAU took to the streets on Wednesday, protesting against rising food prices and demanding some form of alleviation from the government for workers and struggling families. But according to CNBC Africa with Finance Minister Enoch Godongwana fighting to return South Africa’s finances to health, analysts say the government has little room to help.
Godongwana is expected to present to his spending plans in the Medium Term Budget Policy statement in October.
The Commission said it will continue monitoring food prices to ensure any reduction in prices is passed onto consumers, saying it has also started investigations into basic foodstuff value chains to deter opportunistic behaviours of retailers.
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