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Country analysis > South Africa Last update: 2019-08-22  
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Food Pricing Monitoring Committee

Summary Report

SARPN acknowledges the National Department of Agriculture website (www.nda.agric.za) as the source of this document.
The full report can be accessed from that website.
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Introduction

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 chain.

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 Committee.



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