Competition Commission economists have warned that food prices are still too high for minimum wage households to afford, even in the face of cooling price pressures and lower fuel prices.
The latest edition of the Essential Food Price Monitoring Report by the commission found that the prices of various basic foodstuffs were not declining in line with prevailing market conditions.
As a result, many South Africans could not afford the basket of basic foods, stoking fears about food insecurity.
Addressing a media round-table on Friday, Khalirendwe Ranenyeni of the Economic Research Bureau said the commission was concerned about food security in SA as the affordability basket exceeded the R27.58 per hour national minimum wage that large swathes of South Africans were earning.
She said the research revealed that most food prices in its basket did not correspond with the underlying market conditions of lower interest rates, less load-shedding, a stronger rand and lessened inflation — factors the food industry had previously used to justify price increases.
“What we’ve observed since we started tracking is that actors, producers and retailers at different times are quick to increase prices if the cost of an input increases, but they are slow to decrease them when the cost pressure eases and this is a concern we’ve had for a while,” said Ranenyeni.
“There’s been a considerable easing of cost pressures ... we expect that the prices should respond accordingly but unfortunately that’s not what we have seen,” she said.
The prices of individually quick frozen chicken, eggs, brown bread, sunflower oil, maize flour and, most recently, canned pilchards have been monitored by the commission since the Covid-19 outbreak.
Siyabulela Makunga, spokesperson for the commission, said this is done to guarantee transparency and to shield customers from abuse.
The report highlighted that egg prices remained considerably higher than before the avian flu outbreak of 2023 despite producer costs falling by about 15% between November 2023 and March 2024.
It also found that though producer prices for sunflowers declined over the past six months, the average retail price of sunflower oil has remained relatively consistent.
Economist Kagiso Zwane said the commission’s study revealed a mixed bag, with some retailers reporting improved profits while producers were also recovering.
He highlighted that the results of SA’s largest poultry producers, RCL and Astral, were a prime example of this recovery amid improved market conditions.
Last month KwaZulu-Natal-based consumer goods and milling company RCL Foods reported a 31% jump in headline earnings from continuing operations, mainly due to higher sales pricing in response to sustained high input costs.
With Rainbow’s unbundling now complete, RCL Foods resumed the payment of dividends, with the board approving a gross cash dividend of 35c per share.
The commission’s study found that the effects of the midsummer drought last year were still filtering through value chains for summer crop products such as maize meal and cooking oils.
White maize prices increased considerably in 2023 owing to the drought, which caused a 25% loss to SA’s white maize harvest. Supply is expected to remain constrained.
“Prices have increased and are at the highest level that they have been since 2023,” said Zwane. “This is concerning for an essential good that so many households rely on to meet their nutritional needs,” he said.
When it comes to pilchards, which have experienced a surge in popularity as households switch to alternative sources of protein to meet their needs, the report found that the retail price had climbed, while producer costs have gone down in the past two months.
Finished products such as frozen chicken and pilchards are imported, the report said. Therefore, the strengthening of the rand should contribute to lower import prices.
Oceana, the largest pilchards producer, attributed its double-digit profit rise to a combination of cost savings and efficiencies after plant upgrades.
Though the monitoring reports are not enforceable, Zwane said the commission would continue monitoring food prices and engaging with industry players on what is driving them. “At the moment, based on the information that we have, we are not in a phase where we are triggering the commission’s investigative powers as yet,” said Zwane.
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