South Africa’s Competition Commission has come in for a hammering over its findings on food producers and retailers in its latest food price monitoring report.
In effect the commission said some food price increases were unjustified, and that retailers and food producers, had seized an opportunity to push up prices. The report includes what it calls “a deep dive” into the poultry value chain.
This is the eighth report in a series started with investigations of food price increases during the Covid-19 pandemic. Previous editions have largely been uncontentious and welcomed as evidence of the commission doing its job.
Not this time. In a firestorm of criticism, economists, agricultural experts, analysts and others have questioned the commission’s methodology, research, analysis and conclusions. There was even a suggestion that this was a politically motivated attempt to blame others for the results of the government’s mishandling of the economy.
Most of the criticism focuses on the report’s failure to give sufficient weight to the impact on food prices of rapidly rising local and global input costs – from power cuts and generator costs to the effects of Russia’s invasion of Ukraine.
“The Competition Commission is wrong [in their statement],” said agricultural economist Wandile Sihlobo. “There are clear factors driving the prices. Their work on this issue is misguided.”
In the Sunday Times
Sihlobo had another go in the lead item in the business section of this week’s Sunday Times, in an article headlined “No, Competition Commission, food firms aren’t exploiting the poor”.
The article, authored jointly with Prof Johann Kirsten of Bureau for Economic Research at Stellenbosch University, said the commission’s comments were “puzzling and irresponsible” and its accusation of unjustified price increases was “a mischaracterisation of reality”.
Rather than exploiting consumers, retailers had actually absorbed some input costs and moderated price increases.
“A regulating body such as the Competition Commission should be mindful of the critical role it plays in society and be more thoughtful in its research and statements, especially on politically and socially charged food security issues,” they said.
The article was reproduced in full by the agricultural business chamber Agbiz, where Sihlobo is chief economist.
Business Day weighs in
Alexander Parker, editor in chief of the financial daily Business Day, had some scathing criticism of his own, saying the commission’s accusations “seem to be without established basis in fact”.
He highlighted the “sickening statistic” of high childhood malnutrition in South Africa, and said hunger had probably become a political issue. The commission’s report showed that food retailers were being used as a scapegoat for hunger and poverty caused by government failures.
Parker said he had been told that “some ideologically driven people sit in the research division and behave more like activists than researchers.”
“At some point you must do the hard work of treating the cause instead of shouting at the symptoms in press releases,” Parker said.
“The Competition Commission has made a fool of itself. That’s bad for all of us.”
FairPlay highlights report’s misunderstandings and factual errors
FairPlay added to the analysis of the Competition Commission report’s failings. In a letter to Business Day, FairPlay founder Francois Baird focused on aspects of the report related to its “deep dive” into the South African poultry industry value chain.
He said the commission had calculated that, for several months last year, the import price of chicken was above what the chicken sold for in retail shops.
“This nonsense (the commission calls it ‘counterintuitive’) illustrates my concerns about aspects of the commission’s report on the effect of chicken imports on retail prices, including the effects of the imposition and removal of provisional anti-dumping duties in 2022,” Baird said.
Provisional anti-dumping duties on Brazilian chicken imports last year ranged from 6% to 48% for six named producers, and were 265.1% for all others.
Similarly, there were varying tariffs for four EU countries. As the commission did not know which rates applied to any import consignment, it said it had applied the maximum rate to all for the purposes of its calculations from low to high.
“This results in a graph showing import prices, including duties, exceeding retail prices. Worse, it results in conclusions based on that incorrect assumption,” Baird said.
He also highlighted that the commission had misunderstood the timing of bird flu bans on imports of chicken from the EU – it was a country-by-country process over many months, not a single event in March 2022 as the report stated – and the nature of the US import quota, which was not a penalty but a duty free concession to US producers.
“I’m sure there are other errors and omissions that experts will detect.
“I have seen enough to make me suspect that what should have been a worthwhile investigation to the benefit of SA consumers may end up punishing the wrong people for the wrong reasons,” Baird concluded.
