Expanding on the scope of its inaugural 'Essential Food Price Monitoring' (EFPM) report, launched in 2020, the Competition Commission has restructured the report into the ‘Cost of Living (COL)’ report, launched on September 4.

The Commission notes that the COL report includes items beyond essential food to capture a more inclusive and representative view of household economic realities.

This enhanced report retains its focus on essential food items and incorporates additional key non-food items that impact the cost of living for households.

These include electricity, water supply, housing rentals, primary healthcare services – general practitioners (GPs) – minibus taxi fares and petrol, funeral policies, education and Internet usage costs.

The COL report also assesses the role of interest rates in the rising cost of living.

The report aims to provide essential insights into the affordability of basic goods and services, allowing individuals and households to assess their financial capacity to sustain a reasonable standard of living.

The commission explains that this analysis plays a crucial role in identifying the economic pressures experienced by various socioeconomic groups, particularly low-income households, in a time of fluctuating prices and growing inequality.

“While the prices of some of the items in the COL report are administered prices that are set or influenced by government, such as electricity and water supply, it is important to understand the impact of rising costs for these services on households’ budgets particularly low-income households,” it notes.

In the COL report, the commission provides an analysis of the key necessities that reflect unavoidable everyday expenses for low-income South African households.

The data for the COL report was obtained from Statistics South Africa, specifically, consumer price index (CPI) data for the relevant categories over the period 2020 to March this year.

The commission explains that the CPI captures the average change over time of prices paid by consumers for a basket of consumer goods and services.

The report includes various observations.

The report highlights that, over the five-year period, electricity prices increased by 68% and water prices went up by 50% which is a much higher rate than general inflation, which increased by 28%.

Additionally, the cost of rent for houses and flats in South Africa increased moderately over the period and remain below overall inflation.

The report notes that the cost of GP services this year is substantially higher than increases in previous years, which the commission says is concerning as only 16% of the population in South Africa is covered by a medical scheme.

The commission explains that minibus taxi fares generally tend to increase only when there is a major spike in petrol prices noting, however, that once prices have increased, they are seldom reversed once petrol prices decrease again.

The report also notes that the cost of funeral policies remains significantly below overall inflation, which it describes as encouraging given the importance of funeral policies among low-income households.

Primary education inflation increased by 37% while secondary education inflation increased by 42%, both outpacing overall headline inflation which increased by 28%.

Internet usage costs for both wired and wireless connections remain below general inflation and the cost of mobile data decreased following the commission’s Data Services Market Inquiry in 2019 and have remained stable since then.

FOOD

Meanwhile, the commission also provides an analysis of the aggregate spread between retail and producer prices for food items such as brown bread, canned pilchards, eggs, sunflower oil and maize meal.

For its analysis, the commission explains that the spread is the percentage difference between the producer price of goods and the retail price.

“Importantly, the analysis of spreads is based on publicly available information and not intended to make inferences of anticompetitive conduct by individual firms whether acting alone or with competitors.

“Rather it is used to assess price transmission through the value chain and to show where spreads are expanding and contracting,” the commission notes.

While some staples, such as canned pilchards, have shown signs of responsible pricing at the retail level, the report indicates that other essential food items including eggs, individually quick frozen (IQF) chicken, brown bread, sunflower oil and white maize meal exhibit patterns of price stickiness and widening retail margins.

Price stickiness is an economic concept where prices fail to change quickly in response to shifts in supply, demand or broader economic conditions.

Observations made in the report indicate that, in the first few months of this year, the recovery of South Africa’s egg market has remained uneven.

The Commission points out that producer prices are on an upward trend which raises some concerns given that South Africa’s poultry industry is now recovering well following the avian flu outbreak in 2023 and 2024.

The report notes that egg prices are expected to decrease as markets start to normalise, adding that a continued increase in producer prices is likely to be a cause for concern.

Additionally, the poultry industry in South Africa has benefited from, among others, increased availability, reduced import prices and lower input costs.

“It is encouraging to observe that retail margins of IQF chicken have remained stable at under 40%,” the commission says.

The report also notes that there has been a recent increase in producer-level prices from April in response to slightly higher wheat prices.

The farm-to-producer price spread for brown bread in South Africa increased to 77%, which the commission points out is above historic levels.

At the retail level, following an initial increase in the producer-to-retail spread, the report notes that the retail margin has reduced to 15%, indicating that retailers have absorbed subsequent increases in the producer price for brown bread.

Additionally, the retail price of sunflower oil has been increasing from the latter part of 2024, albeit producer prices of sunflower oil have been declining.

The report points out that this upward movement occurred despite a noticeable decline in producer prices in February, indicating a limited pass-through of cost reductions to consumers.

In late 2024, the retail price for maize meal stood at R38.48 and has since risen to R43.04 by May this year, marking a significant increase.

The report indicates that white maize prices have fallen as we enter the new harvesting season in May, but these are not reflecting in maize meal producer prices resulting in a sharp increase in margins.

“The COL report is a valuable tool for the public, businesses and policymakers because it offers a comprehensive view of prevailing economic conditions.

“By identifying and understanding the key underlying drivers of the current cost of living crisis, we are able to determine where anticompetitive conduct may be playing a role in exacerbating the cost of these essentials,” says chief economist James Hodge.