The Competition Commission has published its latest report on food prices during South Africa’s coronavirus lockdown.
Alongside enforcement action against price gouging, the Commission also began to monitor essential food prices more broadly – including upstream food commodity and fresh produce markets – to better understand the effect of the pandemic, the preventative measures of government and the economic crisis on food markets.
The commission’s data suggests that while the onset of the Covid-19 pandemic came with some short-term pricing effects at a wholesale level, particularly on essential food products, all products where a pricing spike can be observed also showed an easing of prices after this period.
“Thus the data from the Johannesburg fresh produce market as well as the producer price data of Stats SA suggest that there is likely little concern for any lasting pricing effects from the pandemic’s initial impact on the market, at least for the products considered here,” it said.
However, the commission said that there is some concern in respect of retailers and retail markets.
The analysis shows that for some essential products, like potatoes and onions, the margins earned by retailers on the producer price (the wholesale price) have grown substantially over the lockdown period due almost entirely to increases in retail prices.
“An examination of margins over time shows that when costs come down, prices tend to come down more slowly, which is of concern to the Commission more broadly,” it said.
An examination of pricing and sales data across all the fresh produce markets in South Africa has also raised concerns around certain features of the market, the commission said.
“Firstly, pricing varies significantly across South Africa’s fresh produce markets. These differences do not appear to be explained by the size of the market or logistics costs involved in getting the product from the farmer to the market.
Coastal markets do appear to be priced higher than inland markets, but the factors driving this are not clear, it said.
“These significant variations in pricing without an understanding of the factors involved is cause for concern for the Commission and justifies further consideration of these dynamics to see if the markets are malfunctioning or not.”
The commission said that volatility in pricing is broadly associated with smaller fresh produce markets, as is expected, but this relationship is certainly not without exception as some products and smaller markets show less price volatility than the largest markets.
“This suggests that smaller markets need not necessarily be subject to volatility and it is important to understand why some markets are more volatile than others, the committee said.
“This would also require a consideration of whether some markets are more susceptible to manipulation than others due to a lack of liquidity.”