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2020-07-15

Food price changes during South Africa’s lockdown – here’s what you are paying more for

The Competition Commission has published a new report on food price monitoring during South Africa’s coronavirus lockdown, following widespread complaints of food price escalations.


Staff Writer | Business Tech

The report, the commission said, culminates from its concerted efforts on enforcement aimed at containing excessive pricing and price gouging on essential food items.

The commission said that food constitutes 30% of low-income household expenditure and is essential for maintaining a healthy immune system, so containing price inflation is a priority during the crisis.

“Of the 1,600 complaints received under the excessive pricing and consumer protection regulations by the end of June, 307 (or 19%) related to basic food products in retail stores, it said.

“At the same time, prices in upstream food commodity and fresh produce markets also started to increase rapidly, resulting in concerns of material food price inflation outside of specific cases of price gouging.”

The commission’s monitoring shows that many food commodities experienced price inflation in part due to the weakening of the rand, and in some cases due to export restrictions being introduced in other markets.

“The depreciation of the rand and initial panic buying which disrupted normal demand patterns provided a basis for some abnormal food price inflation at the beginning of lockdown in food commodity and fresh produce markets.

“It would appear that some stability has since returned both to the currency and domestic fresh produce markets, providing the basis for price reductions currently being realised in upstream markets. However, the crisis has exposed some market features in food value chains that are of potential concern and which warrant further investigation.

“These features and practices by market participants may have contributed to greater price inflation than was warranted by the disruption to the markets,” it said.

Below are some of the key findings from the report.


Household food basket

Citing StatsSA data, the commission said that prices were initially high at the start of the country’s lockdown in early April but, subsequently receded.

“This is consistent with a trend of initial panic buying in late March and early April, and then a steady easing or decrease in prices after that point,” it said.

“This is also consistent with observations above for wholesale pricing of initial increases in prices before prices again fell.”

The category with the largest pricing hike is “milk, eggs and cheese” which initially soared, but decreased in the following weeks.

The commission also pointed to a report by the Pietermaritzburg Economic Justice & Dignity Group (PMBEJDG), which measures food prices by household baskets.

The index is constructed using prices from just 5 supermarkets and 4 butcheries in the Pietermaritzburg area. This provides another more localised perspective on what may be happening at retailers, especially as StatsSA may be biased towards national chains.

While the data shows that prices increased by as much as 30% at times, there was ‘only’ a total increase of 8.1% in the cost of the basket between 2 March (R3,221) and 3 June (R3,486.23).

Furthermore, the trend in the data shows that there was an initial increase around the State of Disaster announcement and a further increase after lockdown. After that, there have been limited changes in the overall basket.

The below table shows how the price of food has changed over the last three months in more detail.


Fruit and vegetables

The Competition Commission noted that fruit is seasonal by nature which helps explain price variation.

Prices reduce as supply expands in the domestic season and then price increases when out of season. However, consumers also switch consumption to seasonal fruit in response to price changes across the different fruits, the commission said.

“The top four fruits (apples, bananas, oranges and pears) did not see the same initial price increase observed for vegetables, and pricing has largely remained flat or on a downward trajectory,” the commission said.

“Avocados show a classical seasonal pattern with a large increase in price followed by a similarly large decrease as the market is flooded with volume. Prices increased again in early June but have since stabilised.

The top six vegetables by volume (potatoes, onions, tomatoes, carrots, cabbage, butternut and sweet potato) all present a similar price trend over the period from pre-lockdown to present, the commission said.

“There is first a material increase in prices which continues for the first 10 days and may in part be attributed to panic buying of staples by consumers.

“This is followed by a decline in prices that continues towards the end of April, before increasing in the first 10 days of May once more. Thereafter, we see a gradual decline in all the top 5 vegetables to around pre-crisis price levels in early June 2020.

“This decline may be attributed to reduced demand due to the continued closure of restaurants.”

However, the commission said it saw an uptick in some prices in the last two weeks of June, “which may be indicative of seasonal price changes and will be monitored closely”.


 


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