EDITORIAL: Competition Commission press release unjustified

The Competition Commission’s media team criticised food price hikes as unfair and greedy in a press release, without reading their own report, which did not support such claims.

The Essential Food Monitoring Report only questioned whether retailers were exploiting the global trend of rising prices and advised them to lower their profit margins.

But the commission’s spokesperson, Sipho Ngwema, accused manufacturers and retailers of raising prices without reason, telling a television channel news anchor that the commission is “worried because there seems to be no relationship or no connection between the input costs … borne by the producers and the prices that consumers pay”.

He accused manufacturers and retailers of putting up prices without reason. 

Yes, food prices have gone up for well-documented reasons such as load-shedding and global factors, squeezing the middle-class pockets and potentially leaving the poor starving.  And the commission and the government are rightfully concerned. 

But to blame retailers and food producers does not appear to have a basis in reality. It is, as agricultural economist Wandile Sihlobo pointed out, “inflammatory”. 

If the commission’s press release accusations are not factual and insufficient evidence is provided, why launch the attack?

It is fair to conclude it appears to be politically motivated and feeds into the growing narrative that the ANC, whose faltering political monopoly is on track to take another beating in the 2024 national elections, will embark on populist policies to hold on to power. That will be a mistake.

It won’t, however, help the poor. When retailers are investigated and are asked by the commission to provide evidence why their vegetable oil prices rose and why garlic prices rose as retailers were forced to do, they employ lawyers and economists and it costs them money.  

Blaming retailers also takes the heat off the government when infrastructure collapse and blackouts add to costs.

Economists lambasted the message of the press release that was widely parroted by the media. They were right. 

For one, economists say the period of analysis of bread prices over a year was too short as there is a four to nine months time lag between prices of commodities such as wheat and the finished product such as bread. Over two years retail prices of bread and grain lag producer prices, Hugo Pienaar, from the Bureau for Economic Research, notes. 

Another criticism is that the analysis is too simplistic. It looks at price increases of three products — when retail stores sell thousands. It ignores initiatives such as the 1-million R5 bread loaves sold weekly by Shoprite at the same price since 2017. 

The Competition Commission’s report argues that retailers should not keep their percentage profit margin the same when basic foodstuff prices soar — a recommendation that ignores rising costs for retailers too and is at odds with the law only allows the commission to charge price-gouging firms if it proves the firm is acting like a monopoly. 

Apart from a temporary law change during the pandemic, the commission has never proven dominance successfully. With little it can do about soaring food prices, globally and locally, the commission seems to want to reduce prices by bullying retailers.

But when stores have faced protests and riots, encouraging misplaced anger at retail firms is what is unjustified.