The Competition Commission yesterday raised a red flag on price increases of sunflower oil and bread in the latest Essential Food Pricing monitoring report as it investigates whether local consumers could be facing opportunistic price increases.
This as the August Household Affordability Index, compiled by the Pietermaritzburg Economic Justice & Dignity Group, found the average cost of the Household Food Basket was R4 775.59, having increased by R534.47, or 12.6 percent year on year.
Cooking oil continued to increase in Johannesburg, this month by a further R7.08, or 3 percent taking a 5L bottle to R246.91, the Household Affordability Index found. The index also reported that flour prices had also increased in all areas except Durban.
The report comes as Statistics South Africa said yesterday that annual consumer price inflation was 7.8 percent last month, up from 7.4 percent in June, with food and non-alcoholic beverages increasing by 9.7 percent year-on-year.
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The Competition Commission said: “South African consumers may be facing opportunistic price increases of sunflower oil as processor prices have increased by far more than sunflower seed prices this year, and retailers have not passed on wholesale cost reductions for bread in the past, resulting in widening retail margins.”
The commission said that high and growing concentration along the sunflower oil value chain, from sowing seed to the refining level – created a risk of opportunistic price increases above cost increases during periods of inflation.
“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,” it said.
Following the onset of the Eastern European conflict, there were several news reports of an increase in the price of cooking oil, it said.
“While this was to be expected given the importance of grains from Eastern European to global food markets, it may have presented an opportunity for retailer and wholesalers to raise prices in anticipation of sunflower seed price increases rather than in response to them.
“While the Commission appreciates the difficulties imposed by an uncertain global environment, the steep divergence of the sunflower seed Safex price and the wholesale and retail prices of cooking oil may be demonstrative of such pricing behaviour, specifically at the producer level of the supply chain,” it said.
There had also been an increase in the wholesale-to-retail price of bread over time.
Ngwema said while this might be indicative of increases in the costs of retailers, the evidence suggested that cost decreases in the past had not been passed on to consumers by retailers and this was the source of margin growth.
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Regarding maize meal, the report found that while retail prices had increased this year, the retail prices appeared to be largely related to the increase in the Safex price for white maize but the overall spread has increased somewhat this year.
Ngwema said all these foods were within the scope of the current investigation. “The commission will continue monitoring food prices going forward as the global food markets begin to normalise and ensure that any cost reductions are passed on through the value chain immediately.
“The commission has also initiated investigations into basic foodstuff value chains in order to act against any opportunistic behaviour, given the levels of concentration in the value chain,” he said.
Abigail Moyo, the spokesperson of the trade union Uasa, said yesterday that consumers were battling to survive as the price of basic goods and services continued to increase, becoming unaffordable to the average man in the street.
BUSINESS REPORT