Panic purchases and the weakening of the rand-dollar exchange rate are partly responsible for the sharp rise in food prices at the beginning of the Covid-19 restriction.
These are some of the conclusions of the Competition Commission in a report on excessive food prices.
Price increases were exacerbated by markets that were unable to function effectively during the constraint.
Of the 1,600 complaints received by the end of June about exorbitant prices, 307 or 19% of the total were about basic food products in grocery stores, the commission said in a statement on Tuesday afternoon.
The report comes amid the commission’s effort to curb excessive pricing and exploitation during the Covid-19 restriction. Quite a few companies have been caught exploiting the public through extremely high prices for face masks, hand sanitizers and also essential food items.
According to the commission, market forces that initially pushed up food prices have meanwhile calmed down and prices have now stabilized. Consumers should now see price reductions. The experience from the past is that food prices are rising rapidly but falling slowly – “another market feature that will need to be rectified”, according to the commission’s report.
Other underlying features that the commission’s price monitoring came across are the large difference between wholesale and retail prices. This needs to be further explored, raising serious questions about the distribution of risk and profit in the value chain. Farmers seem to be exposed to almost all the price risks, while most of the profits lie with agents, distributors, food companies and retailers.
The commission is concerned about the high profit margins seen with fresh produce and certain essential food products in some stores before and during the restriction. The commission speculates that this may be related to the exclusive lease agreements in the retail industry, which the commission wants to put an end to through voluntary settlements or otherwise through legal action.