The Competition Commission will “in earnest set in motion” an inquiry into the fresh produce market, after the publication of its latest Essential Food Pricing Monitoring Report (EFPM).
In its latest EFPM report, the Commission warns that South Africa consumers face opportunistic price increases of sunflower oil and the organisation red-flagged high and growing concentration along the sunflower oil value chain.
“The reasons for the price escalation are still being investigated by the Commission. The report further found that the price of some products, including bread, increased, but the prices have not come down as the economic situation changed,”
the Commission said in a statement.
Rising food prices was a feature of the global economy last year, but world food prices, as measured by the UN’s Food and Agriculture Organisation’s food price index — eased in December, the ninth consecutive monthly fall.
Averaging the index out over 2022 however saw it gain more than 14% compared to the previous year, to reach the highest since records began — the index measures average meat, dairy, cereals, vegetable oils and sugar price indices.
A food inflation brief from the Bureau for Food and Agricultural Policy said food prices in South Africa had remained at elevated levels and consumers could expect higher prices into 2023, as the full effects of increasing commodity prices and weaker exchange rates filtered through to retail markets.
The Competition Commission said it found the producer price of cooking oil had increased dramatically in the first half of 2022 from R506.67 in January 2022 to R873.33 in June, an increase of 72%. By contrast, the retail price had increased by 41%.
The Commission said retailers appeared to have absorbed some of the upward pricing pressure coming through from wholesales.
“Had retailers not done so, one might expect that the prices paid by consumers would be even higher than they currently are.”
The Commission first announced plans for an inquiry into the Fresh Produce Market last year, to establish if there were features in the value chain that lessen, prevent or distort competition.
The latest EFPM Report found that cooking oil prices have increased in a way that was not related to increases in sunflower seeds. This was especially true at the producer level.
The commission said rising transport and energy costs may be behind the price increases, but a firm view could only be ascertained by an analysis of firm-level prices against costs.
“Given the concentrated and integrated market structure of crushing and refining activities in South Africa, exercising market power may also play a role in driving up wholesale prices. The Commission has therefore initiated an investigation into essential food products to interrogate the drivers of these increases and whether they are the result of anti-competitive behaviour,”
the Commission said.