Have you been shocked at the rapid price increase of some of your regular food purchases? City Press/Absa Money Makeover candidate Peter has been keeping a close eye on his grocery bills and has seen certain items increase, such as tinned tuna, cheese, Bakers Toppers biscuits and sugar.

Social media has been outraged by the price of milk products, butter, eggs, cooking oil and especially rice. As one commentator wrote “I can’t pinpoint specifics, but my usual weekly shop has gone up by about 30% since the start of lockdown. Outrageous.”

Yet, when we contacted PicknPay head office and a franchise owner at Spar, they insisted that the overall food inflation has only been around 3%. Disclaimer – many of the social media comments related to Checkers and Shoprite products but the group does not comment on food prices.

The weekly statistics collected by StatsSA on a national level show food inflation is well under control.

So what is going on? Who is right and who is wrong?

According to Pick n Pay prices may change as a result of specials that the retailer has run to assist customers. Pick n Pay announced this week that it will be investing R500m of its efficiency savings into its promotions over the next year. “These savings will be applied to various everyday basic food items, including bulk fresh produce and combo deals, as required over the next year to keep prices as low as possible for customers,” says the retailer.

This means that some products will come off a promotional price, or the promotion will change, so the price will change but this doesn’t mean it is necessarily an increase.

Pick n Pay adds that on selected items there could be external factors that can cause prices to fluctuate, such as the strength of the rand which is out of the suppliers’ control.

“We will always fight for lower food prices for our customers and we have consistently delivered average prices well below that of food inflation. We will never raise prices artificially as a result of this or any other crisis and we stick by that assurance.”

No evidence of price fixing

James Hodge, chief economist at the Competition Commission confirmed in an interview earlier this week that there was no evidence of price fixing or increases by the food retailers.

FNB agricultural economist Paul Makube says that the weekly statistics collected by StatsSA on a national level show food inflation is well under control. Although there was a definite spike in food prices at the beginning of lockdown, this has largely decreased.

However, that does not mean that certain food items have not seen significant price hikes due to various factors, including regional differences, transport costs, supply issues and the weaker rand.

Makube says that at the farmer’s level there has been price deflation, so prices are actually down, although lamb and mutton has bucked this trend due to the ongoing drought in the Karoo area and a subsequent shortage of these meats.

“As you go up the value chain the margins start widening for a number of factors, such as logistics and the cost of transport,” explains Makube.

Normally transportation costs are offset by filling up the truck with products for the return journey. However, with restrictions in travel across provincial borders, in some cases the supplier must carry the full cost of the transportation in one direction and this fed into higher product prices.

This is particularly significant for smaller suppliers who do not own their own transport fleets. While one would have expected the lower fuel prices to benefit transport costs, this has not been the case.

Effect of the weak rand

The weak rand has impacted certain food prices, especially rice which is largely imported. Makube explains that the rand weakened from R14/$ to R19/$ at one point – which is a 36% devaluation. This would have effectively made any imported food 36% more expensive. Add to this the fact that many imported food items were stuck at the ports for several weeks, increasing cost of storage and creating supply shortages, it is not surprising that those products would see a spike in prices.

Makube says he is surprised at the complaints around dairy products as the farmers are certainly not seeing any benefit, however, he says this could be a case of short-term comparisons. At the beginning of lockdown retailers were forced to massively discount perishable dairy items and were encouraged to do so by suppliers who had to move stock before the products soured. As prices recover, it could make a dent in our grocery bills. PicknPay confirmed that the price of a 6 pack of 1 litre PnP UHT Low Fat Milk has not changed since before lockdown.

But it could also be due to bottlenecks creating a shortage of supply and therefore increasing demand. There are large parts of the economy that are not fully operational. Even in the current lockdown level, producers and suppliers incur stringent safety measures which impact production.

Consumers wishing to avoid regular trips to the shops are bulk buying which could also lead to shortages in certain products, so retailers are having to increase orders. Shortages will cause price increases and could affect products like long-life milk or cooking oil which were favourites for bulk buying.

Makube adds that overall, people are spending more on groceries, but this is not simply due to price increases as demand at grocery retailers has been higher with more people cooking at home.  Some of that eating out and take-away spend has been re-allocated to groceries.

The good news is that Competition Commission economist James Hodge expects to see a reduction in food prices once the economy moves fully out of lockdown. Until then the only way to reduce our grocery bill is to shop smartly. Keep an eye out for specials and understand the value chain of the product you are buying. If it has any imported element, you will be paying a lot more. You may have to skip the lamb and rice and don’t just buy your regular brand. If it is experiencing logistical issues or bottlenecks, it will be reflected in the price.

This article first appeared in City Press.