The Food Pricing Monitoring Committee appointed by the Minister of Agriculture and Land Affairs, Ms Thoko Didiza, in January 2003 has completed its second report and submitted it to the office of the Minister early this year.

The various analyses of food retail prices reported in the Report clearly confirm the initial sharp increase in basic food commodity prices (notably maize). This initial shock then spread through several food value chains followed by a levelling off of price increases for virtually all food items, and even a decline for some products (red meat, maize meal, samp and cooking oil). However, while it is true that these prices came down from their peak in 2002 and early 2003, in all cases, the decline was not as large as the initial increases during 2001/2002. When considering the period (Jan - Oct 2003) over which the Committee monitored food prices, the trends reflect price declines for 11 out of 24 monitored by the Committee. The data does show a few anomalies, for instance for products such as milk powder, peanut butter, margarine and onions, of which the prices have increased too far above food price inflation in 2003.

The analysis of food price inflation for different income groups shows that poor households experienced higher inflation rates than wealthier households. At its peak, in October 2002, poor households were confronted with a year-on-year food price inflation of 23.1% while richer households experienced a food price inflation of 19%. The benefit to the poor of the recently lowered prices for most staple foods is reflected in a food inflation rate of 3.35% compared to that of richer households of 4.21%.

The fact that the Committee received virtually no inputs and complaints from the public through the toll-free number and e-mail line after June 2003 provided some indication that food price inflation abated, and that consumers did not pick up any extraordinary increases. The monitoring process by the Committee also found no 'sharp' increases in food prices in the period since its appointment. The existence of the monitoring mechanism, increased public awareness as well as improved and more stable macro-economic conditions all assisted in achieving slower food price inflation and even resulted in food price reductions in some cases.

The Committee's analysis shows that in September 2003 the total cost of the basket of food items monitored by the Committee was only 1.5% cheaper than in September 2002, which confirms the sentiment expressed by consumers. Recent statistics (June 2004) based on the National Agricultural Marketing Council (NAMC) database of consumer prices suggest that the same basket of food is now 3% cheaper than in December 2003.

Thus, although the market structure allows the opportunity for predatory and unjust pricing, there is limited evidence that this actually happened. What the analyses of the Committee do show is that all price increases seemed to follow trends in the prices of raw materials, other costs and the exchange rate. This, plus the results of most of the supply chain investigations provide sufficient evidence that collusive and unfair business practices are not prevalent.
The Committee made 16 recommendations along five main themes:

* Strategic grain reserves
* Direct government programmes
* Improved agricultural information systems
* Increasing competition and reducing barriers to entry
* SAFEX rules, transport and logistics

The department looked into the following recommendations made by cabinet:

* (The continuation and expansion of food pricing monitoring function throughout the country):
Government has tasked the National Agricultural Marketing Council to expand from its existing scale of coverage to cover the entire country.

* (Strengthening the capacity of the department to collect Agricultural Statistics and information):
Government has already increased the budget allocation from the current R11.8 million to R14 million in order to facilitate the implementation of this recommendation.

* (That Government facilitates the coordination and strengthening of community public private partnerships on food and nutrition programmes in general and food relief and emergencies in particular):
The Minister of Social Development on behalf of government through the distribution of food parcels to more than 244 thousand households. The DoA is taking a lead on the implementation of the Integrated Food Security and Nutrition Programme, which is aimed at alleviating food insecurity amongst the impoverished households.

* (The establishment of a task team to further analyse and benchmark the performance of strategic food value chains in order to improve their performance, efficiency, competitiveness and the ability to manage food supply risks):
The government has noted this recommendation and work is done in this regard.

The report will also be available on the department's website: http://www.nda.agric.za or by phoning this number 012 319 7141.

Source: Graan Suid-Afrika
Issued by: Department of Agriculture
20 August 2004
Title: Final report of Food Monitoring Committee released