The Competition Commission’s (CompCom) third essential food pricing monitoring report has found that retail food prices have not returned to normal, following increases during the initial ‘hard’ lockdown in South Africa to contain the COVID-19 pandemic.
The report highlighted the CompCom’s concern that some prices, particularly those for meat and dairy, had not come down.
According to the CompCom, it was critically important for the welfare of most citizens, especially lower income households, that prices for essential food products did not escalate.
“Essential food items make up just over 30% of the expenditure of the bottom three income deciles,” the report said.
Milk, which was an essential food product and formed an important part of the consumer basket, was also one of the top 10 food expenditure items for low-income households in South Africa.
“The Commission has received, particularly during the initial lockdown phase, a number of complaints from farmers and industry [members] regarding higher retail prices despite downward pressure on prices for farmers,” the report said.
Data suggested that the retail price of milk had seen a greater increase than the underlying increase in producer prices, which had risen more slowly, a trend that had been ongoing since 2012.
“The producer price of raw milk has gone up by just under R2/ℓ from R3,20/ℓ in January 2012, to R5,13/ℓ in September 2020, whereas the retail price has increased by over R6/ℓ from R8,35/ℓ to R14,73/ℓ, with the price spread growing from about R5/ℓ to almost R10/ℓ.
The report revealed that retailers’ margins increased from R1/ℓ in March 2020 to R1,77/ℓ in April 2020, a near doubling of margins. The data suggested that retailers had managed to keep processors in check during this time, while “taking additional margin themselves”.
“As of September 2020, the elevated retail price of fresh milk and seemingly depressed wholesale price that [was evident] in the first month of lockdown appeared to have persisted without any correction thus far.”
Data also revealed that although wholesale meat prices had largely remained stable even during the national lockdown, there had been increases in retail prices at the start of the lockdown, especially for chicken, beef, pork, lamb and mutton.
The CompCom was particularly concerned about the rise in chicken prices, as chicken was regarded as a staple source of protein. Data revealed that non-individually quick frozen chicken prices increased sharply in April 2020 from around R48/kg in March, to around R60/kg in April.
“It is clear from the analysis in this third quarterly food price monitoring report that concerns around conduct of retailers [during] the lockdown period continues to persist,” the report concluded.