Retailers urged to avoid hiking prices of existing food stocks during Middle East crisis

South Africans are bracing for higher food prices as rising global oil costs push up production expenses, but industry players warn against hiking prices on existing shelf stock that is unaffected by the conflict.

The high cost of food, particularly for poor households, has already been a recurring theme at an ongoing seven-day inquiry by the South African Human Rights Commission into food systems and how costs affect communities.

Food price hikes in response to the steeper fuel costs arising from the Middle East conflict are unavoidable, but the impact should neither be immediate nor a blanket one, said Mervyn Abrahams, programme co-ordinator at the Pietermaritzburg Economic Justice and Dignity Group (PMBEJD).

“We can’t quantify the impact yet, but … we know that oil prices play an important role in food prices because of it being consumed in most parts of the food chain,” Abrahams, whose organisation focuses on the impact of food prices on lower-income households, told Business Day.

“The quantifiable measure of that is difficult to assess at this point, largely because we don’t know what stocks are currently available in South Africa. So depending on the stock availability by farmers and stores, that should delay the impact a little.”

There is no justification for a change in the price of food items already on supermarket shelves, he stressed.

“We need to watch that price increases will vary across different types of foods and at various times, and we have to assess the level of stock that is already sourced in South Africa, because those should not carry the bigger prices or the price increases that we are projecting,” Abrahams said, predicting that the cost of imported foods should lead the way in a month or two.

“If we look at rice, for instance, it is totally imported, mainly from Southeast Asia. So when petrol … and shipping prices go up … we are bound to see that increase in about a month, depending on the stock of rice we have in the country.

“But we must be careful about price-fixing and price hiking. That is something we’re going to have to keep a close eye on. Some of the stock that is currently in the stores precedes the crisis. And therefore we do not need to see an increase in those.”

Another looming price surge due to the Middle East turmoil is that of fertiliser, but it should not affect the price of South Africa’s summer crops, such as maize, which have already been planted, Abrahams said.

But we must be careful about price-fixing and price hiking. That is something we’re going to have to keep a close eye on. Some of the stock that is currently in the stores precedes the crisis. And therefore we do not need to see an increase in those.

—  Mervyn Abrahams, programme co-ordinator at the PMBEJD

“But we should probably expect an increase that will happen as part of logistics and manufacturing, because those draw directly on petrol prices [which] are possibly about to see a massive increase next month,” he added.

But as South Africa’s poor households particularly brace for more expensive food, they might be spared from a similarly steep jump in the cost of public transport, which millions rely on, independent economist John Loos said, drawing on historical trends.

“When breaking down the modes of land transport to view the impact of oil price shocks, it appears that those having to use private transport are likely to be more directly affected, whereas public transport inflation during a fuel price shock might be less severe,” he said.

“In times of a fuel price shock, public transport operators appear to absorb a portion of the cost increase, while in the fuel price dips they don’t cut fares accordingly, thus smoothing out the volatile fuel price cycles for public transport users quite significantly.”

But this is unlikely to be enough to offset the impact of food prices, which rights groups making presentations to the SAHRC have argued are already exorbitant.

“The issue of pricing has been spoken about at length to say when we talk about access to food, we should also look into how much it costs,” SAHRC spokesperson Wisani Baloyi told Business Day on the third day of the inquiry on Monday.

“There has been a concern, and it cuts across [income categories]. It’s poor people who rely on grants but also people who can just about afford things [who are affected].

“They say [that due to] the pricing of things it becomes difficult to buy something nutritious in the food basket because of how expensive food is. That has come across many times during the inquiry.”