It is investigating the comparative margins companies earned on specific food items.
The Competition Commission has various initiatives under way to monitor food prices, which have a major effect on the cost of living for poor households, trade, industry and competition minister Parks Tau says.
The commission had identified agriculture, food and agro-processing as priority sectors.
“The commission will continue to proactively monitor cost of living, including prices of essential food, and take appropriate measures in terms of the Competition Act,”
the minister said.
Apart from the commission’s Food Fresh Produce Market Inquiry and its Cost of Living report, it has a joint project with the department of agriculture to compare South Africa’s firm margins and spreads between the commodity prices and final retail prices for zero-rated food products with those of selected other countries. The study has focused on breads, maize and maize products, tinned fish, milk and milk products and vegetable oil.
The aim of the project is to determine the role of profits as a driver of food inflation.
“The purpose of the project is to identify where South Africa has higher margins or spreads than the norm in more competitive markets and then prioritise addressing those high margins or spreads. The first phase is due for release in this quarter,”
Parks said in a written reply to a parliamentary question by MK party MP Mariam Muhammad.
Muhammad wanted to know what action the government was taking to address the worsening cost-of-living crisis and growing evidence that major food retailers and distributors were inflating prices far beyond inflation rates.
Relying on input from the commission Tau said the commission had also initiated global and continental action through UNCTAD, Brics, the International Competition Network and the African Competition Forum to assess commodity markets and concentration amongst global commodity traders.
“Commodity price setting happens in these markets and are influenced by the traders in core essentials such as grains and oilseeds. The commodity prices are the primary driver of essential foods such as bread, maize meal and cooking oil, but also meat, poultry and dairy proteins through the high share of feed costs in driving these prices too. This is a global issue and requires a co-ordinated global response,”
Tau added.
The Cost of Living report published by the commission provides insight into the affordability of basic goods and services for low-income households, such as essential food items and key non-food items such as energy, water, schooling, transport and data. The food items monitored are sunflower oil, brown bread, eggs, chicken and maize meal.
“The commission uses the report to reflect alignment or lack thereof between the changes in food production costs and changes to retail prices,”
Tau noted. Publication of exploitative behaviour had in the past resulted in the correction in retail or processor pricing.
The Fresh Produce Market Inquiry into competition in the sector, which started in March 2023, found there were “exceptionally high” concentration levels among market agents and that only four market agents largely supplied essential fresh produce such as potatoes, onions and tomatoes.
It identified 31 remedial actions and recommendations intended to promote competition, lower barriers to entry, and create a more inclusive and competitive fresh produce market. The measures included recommendations for policy reform, market restructuring, and targeted support for small-scale, emerging and historically disadvantaged farmers.
Tau said the commission continue to foster implementation of these recommendations and remedies which are anticipated to ease the burden on food prices, in particular fresh produce.
Source: Business Day
