The Competition Commission has warned that consumers could be facing what it believes to be “opportunistic price increases” for staple foods in South Africa.
South Africa’s competition regulator has accused the country’s retailers of overcharging consumers on sunflower oil and bread prices.
The Commission’s latest work in food price monitoring has revealed several concerns in South Africa’s food markets and food value chains. These include wide farm-to-retail spread in prices, large price differences between regions for basic fresh produce, growing margins at the processor and retailer level, as well as the general trend of price inflation hat started with the COVID-19 pandemic and has been exacerbated by supply chain constraints and the Eastern European conflict.
The commission’s report found that the price of some products has gone up — but the prices have not come down, as the economic situation changes. 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.
The Competition Commission suspects that some industry players may have been taking advantage of the uncertain global economic situation. According to the report, sunflower oil processor prices went up by 72% this year, far outpacing the price of sunflower seeds — which has remained relatively stable.
Chief economist at the commission James Hodges said:
“What we found in this report is that the cost of sunflower seeds at your commodity exchange has not been going up this year at all, it’s been relatively stable.”
The report also finds an increase in the wholesale-to-retail price of bread over time.
“Whilst this may be indicative of increases in the costs of retailers, the evidence suggests that cost decreases in the past have not been passed onto consumers by retailers and this is the source of margin growth.”
The price of a margarine brick increased by 6% from January 2022 to June 2022. This is significantly lower than the increase in the retail or producer price of cooking oil.
Ongoing food price monitoring remains a priority for the Commission.
Statistics South Africa earlier on Wednesday reported that consumer inflation had accelerated to 7.8% in July. The announcement also came as unions took to the streets, to protest rising food prices and demand that the government cushion workers and distressed families.