The Competition Commission is continuing its investigation into rising sunflower oil and food prices as it believes consumers may have been overcharged by wholesalers taking advantage of the inflated commodity costs.
The commission says many consumers are struggling to afford food, making its ongoing price monitoring a priority.
The high cost of food is one of the main reasons why the SA Federation of Trade Unions (Saftu) and Cosatu, the country’s biggest trade union federations, took to the streets in protest on Wednesday.
They warned the government to do something about the food price increases or face more protests.
The commission said in a statement that as food inflation appears to be stabilising globally, it hopes that savings will be passed on to consumers.
The commission is empowered to investigate and recommend prosecution if it finds companies have engaged in collusive and anticompetitive behaviour, but it cannot set prices.
It also wants to see if the high concentration of oil producers is allowing them to take advantage of consumers.
While worried about consumers, the commision is up against global forces as food inflation is a trend worldwide.
The UN Food and Agricultural Organisation’s food price index is a measure of the monthly change in international prices of a basket of food commodities that includes meat, dairy, cereals, vegetable oils and sugar. The basket has increased 60% in price since the beginning of 2020.
Fearing unrest
The global price of sunflower oil rose near end-February after Russia invaded Ukraine, the world’s largest producer of sunflower oil.
In April, due to to skyrocketing prices, Indonesia — the world’s largest producer of palm oil, used in many processed foods, snacks and skincare products — banned the export of the oil fearing it would lead to unrest. Under global pressure, it lifted the ban near end-May.
In SA, consumers have paid more for vegetable oils this year. Nielsen market research agency, which tracks the prices of more than 80% of groceries sold at some 150,000 stores, found that consumers paid on average R42.76 a litre for cooking oil in the week of February 20 before the war broke out. It rose to R54.70 a litre in the first week of May.
The commission admits that retailers have been absorbing price costs to shield consumers, with wholesale prices of vegetable oil up 72% this year in SA and retail prices only up 36% in 2022.
Small Talk Daily analyst Anthony Clark, who reports on soft commodity prices, said UK consumers are also complaining about the cost of food.
“It isn’t just localised. I think their competition commission once again looked at everything in isolation. We were complaining bitterly about the cost of edible oils going into, for example, fish and chips shops.”
But he said on top of global food inflation, SA’s food producers actually have greater challenges than their foreign counterparts, as load-shedding also had an effect on food producers.
Volatile rand
Maize, wheat, vegetable oils and other soft commodities such as rice are paid for in dollars and their cost is vulnerable to foreign exchange movements.
“We have an extremely volatile rand, which adds to prices,” said Clark.
The commission says oil prices have risen above sunflower seed prices and cannot be fully explained by rising fuel and distribution costs. This could “indicate opportunistic pricing behaviour that is not related to costs”.
But Clark says the commission is “missing the point”.
“If the Competition Commission only looks at the seed price, they miss some important details such as the rising cost of fuel and food distribution and the exponential increase in packaging costs.
“Sunflower oil, from its raw state as an oil, has to be stored, refined, packaged, transported and labelled. All of that costs money.”
Packaging prices have risen exponentially due to crude oil prices and international paper shortages.
At Pick n Pay’s annual results presentation in May, chairperson Gareth Ackerman said the commission’s decade-long ongoing inquiries into the food sector cost time and money but resulted in no findings.
“It would also be helpful if government agencies concentrated on the job at hand. We have had nearly a decade of grocery market inquiries by the Competition Commission, who essentially found nothing. Now there’s a new inquiry into fresh produce. This comes at a huge cost in both money and time.”
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