Food inflation at nearly twice the rate of overall inflation: Competition Commission

Food inflation remains high despite the overall slowdown in prices. In a report, the Competition Commission says it’s actively monitoring essential food prices and investigating factors driving food inflation. The report compares trends in grocery retailer margins with those of global peers.

It also shares insights into the rapid increases in input costs due to inflation volatility, in the prices of maize meal, cooking oil and bread. When these costs do come down, consumers do not necessarily enjoy a significant reduction in retail prices.

The Competition Commission says food inflation remains at nearly twice the rate of overall inflation. It says this is due to the food rocket-feather effect which means, prices are quick to rise in response to a cost increase but are slow to fall when costs decrease, thus putting pressure on already overburdened consumers.

“The commission has observed that while overall inflation has come down, food inflation remains at nearly twice the inflation rate for all goods and services. Since the update of COVID-19, the commission has been actively monitoring essential food prices and investigating factors driving food inflation. This ensures that there is transparency regarding the profit margins set by producers and retailers of these products,” says Competition Commission Spokesperson Siyabulela Makunga.

The report also found that power cuts cost food producers and retailers more money. This is due to them tapping into alternative energy sources during load shedding. These costs result in higher food prices.

However, consumer economists say the industry is more accustomed to the energy crisis now. Therefore, there shouldn’t be many signs in the next quarter that suggest blackouts had an impact on food prices.

“So, there are signs that we will see food inflation starting to go down. So, over the past two months or so, we’ve actually seen in terms of the CPI basket that food inflation is decelerating. So that just means prices are continuing to increase, but at a slower rate. And that will hopefully continue in the in the second half of the year. We are also a little bit more accustomed to having to supplement the energy issues, so we shouldn’t see more of our electricity or power issue impact on food prices cause that’s already in the numbers at the moment,” says Consumer Economist at Liberty Zandile Makhoba.

Food price inflation jumped to a record 14.4 % year-on-year in March, the highest rate of food inflation since March 2009. The annual rate for the food and non-alcoholic beverages category was 9.9 % in July, lower than June’s 11 %. Consumer inflation fell to 4.7 percent year-on-year in July from 5.4 percent in June.