Despite national food security, many South African households experience continued food
insecurity, malnutrition and unemployment. According to data from StatsSA, approximately
14.3 million South Africans are vulnerable to food insecurity. These are the households that
seem to have been severely affected by the price increases of basic foods during 2002. The
dramatic impact of rising food prices on these households, and also the effect of food price
inflation on South Africa’s inflation rate, compelled the Government to investigate ways and
means to deal with this crisis.
Suspicion about manipulation in the commodity market, and concerns about concentration
and market power in the food manufacturing and retail sector created the perception amongst
consumers and Government that the role players in the food sector were unfairly increasing
the prices of basic foods. All of this pointed to the need for an investigation into pricing
behaviour in the food sector.
Outline of the Report
The report of the FPMC has been divided into seven parts. In Part 1, a summarised report on
the main activities, findings and recommendations of the Committee is presented. This is
followed in Part 2 by three Chapters on the background to the appointment of the Committee,
and an explanation of the manner in which the Committee approached its terms of reference.
In Part 3 the Committee approached its key task of monitoring food prices from five different
angles, that is, using time series from StatsSA (Chapter 1); actual prices from time series of
aggregate data (Chapter 2); data from 6 monitoring points (two in rural areas, two in periurban
areas (townships) and two in main cities or towns) in each of the 9 provinces as well as
data extracted from pay point scanners in retail stores (Chapter 3); and, lastly, data on the
differences between prices in urban stores and those of spazas/general dealers in remote rural
areas (Chapter 4).
Part 4 addresses the ‘investigation’ element of the Committee’s terms reference. The first
Chapter deals with the agricultural commodity market and with aspects related to potential
manipulation of the market. This is followed by eight Chapters discussing selected food value
chains in detail with the aim to determine how prices are formed at each stage of the value
Part 5 continues the ‘investigations’ and addresses issues related to the causes of food price
increases. Chapter 1 considers the influence of price increases of farm requisites. Chapter 2
considers the role that is played by other exogenous factors such as transport costs and the
perceived collusive behaviour of silo owners vis-а-vis the cost of basic food. Chapter 3
addresses practices related to the relationships between food manufacturers and retail stores,
while in Chapter 4 aspects related to market structure and market power are analysed, and
how these influence the transmission of prices through the value chain.
In Part 6 of the Report the Committee brings into effect point 6 of its terms of reference,
namely to “ …monitor the regional SADC food situation”.
Part 7 of the Report contains the concluding chapters as well as the recommendations of the