CoE Articles

Accusations of price gouging a common feature of COVID-19

Published , by Mologadi Makwela

In June this year, in what was the first contested case of excessive pricing related to the COVID-19 pandemic in South Africa, the Competition Tribunal found a company called Babelegi Workwear and Industrial Supplies guilty of what it described as “progressively bolder” price hikes on face masks.

The Tribunal fined Babelegi a modest R76,040.

A month later, however, the Tribunal cracked the whip more soundly when it slapped a fine of R1.2 million on Dis-Chem Pharmacies. This for the company’s “especially egregious” price increases “of the magnitude of 47%-261% without corresponding increases in costs” on surgical masks.

These cases were not isolated. By July, the Tribunal reported that it had reached consent agreements with some 20 companies for similar practices of excessive pricing since April.

As with essential items like face masks, there have also been concerns about the observable rise in food prices over the lockdown. Were these just the result of market forces at work – especially issues of supply and demand – or were there perhaps other more nefarious explanations to be found?

This was among the questions that came up at the ‘Food Retail Price Dynamics During Covid-19 Lockdown’ virtual meeting hosted by the Food Governance Community of Practice (FG-CoP) on 28 October. The FG-CoP is supported by the DSI/NRF National Centre of Excellence in Food Security (CoE-FS) at the University of the Western Cape and the University of Pretoria, and looks at the operation of the food system and how this aids or impedes access to food.

According to the Pietermaritzburg Economic Justice & Dignity Group (PMBEJD), food prices had certainly gone up in the areas in Cape Town, Johannesburg, Durban and Springbok it has monitored over the past months, reported the organisation’s Mr Mervyn Abrahams. Using its in-house Household Affordability Index – based on a basket of 44 items identified by women living in seven-member households in low-income communities – the PMBEJD found that food prices had increased noticeably between March and April, then flattened out, but appeared to be ticking upwards again in August.

“We do not know why prices have increased in August: many of the disruptions that had caused food prices to spike from March are no longer at play, and South African agricultural output is strong,” the organisation wrote in its report that month.

The levelling out of prices between April and August may well have something to do with Department of Trade & Industry and the Competition Commission promising that they would keep an eye out for cases of price gouging, said Abrahams. “In terms of interventions we would say that that that intervention was useful at that moment,” he observed.

The Competition Commission, it turns out, had detected similar patterns to those observed by the PMBEJD, indicated the Commission’s Mr Jason Aproskie. Early into the lockdown, the Commission received several complaints about untoward hikes in the cost of fresh produce.

But understanding or explaining some of the fine details of the food system, and its many pricing anomalies, are difficult, argued both Aproskie and Mr Andrew Partridge of the Western Cape Department of Agriculture. Often, known variables like market size, logistical costs or other market dynamics fail to throw light on the baffling variations of fresh produce prices, both agreed.

The available data offer few easy answers. Some pricing information is easier to come by at some points along the food system (as from centralised fresh produce markets) than others (retailers set prices independently), Aproskie pointed out.

But the variations in data, its sources and its analysis do raise “the issue of the power dynamics involved in the gathering of data, in the interpretation of the data, and also in terms of the evaluation of the data through various different indices”, summarised meeting convenor, Mr Florian Kroll of the Institute for Poverty, Land and Agrarian Studies (PLAAS) at UWC. Kroll is also project leader at the CoE-FS.

 

As yet, there appears to be difficulties in pinpointing where along the supply chain the most dramatic price increases occur. It is important to understand this process and identify the price dynamics at the levels of production, imports and retail

Professor Bruno Losch, CoE-FS

It is here, said Losch, “that we have the very core dynamics which are the centre of the political economy of the system in South Africa”.

Abrahams concurred. But parts of the food system are no as transparent as others, he argued. “So we do have farm gate prices. We do have the data from the fresh market. The difficulty is really about accessing how the value increases from that point to the moment it arrives from the shop.

It’s a question that consumers in South Africa, especially the poor, may want answered.

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