The Competition Commission has launched its inaugural Cost of Living (COL) report, expanding on its previous ‘Essential Food Price Monitoring’ (EFPM) report from 2020. This new report, released on September 4, aims to provide a broader and more inclusive view of household economic realities.
The COL report goes beyond essential food items, incorporating key non-food expenses that significantly impact the cost of living. These include electricity and water supply, housing rentals, healthcare services, transport fares, petrol, funeral policies, education, and internet usage costs. Additionally, the report examines how interest rates influence the rising cost of living.
The report is designed to offer essential insights into the affordability of basic goods and services, helping individuals and households evaluate their financial capacity for maintaining a reasonable standard of living. It plays a crucial role in identifying the economic pressures faced by various socioeconomic groups, particularly low-income households, amidst fluctuating prices and growing inequality.
While some prices in the report are administered by the government, such as those for electricity and water, the Commission emphasises the importance of understanding how these rising costs affect household budgets, especially for lower-income families. The report details the key necessities that represent unavoidable everyday expenses for these households.
Data for the COL report was sourced from Statistics South Africa, specifically consumer price index (CPI) data covering the period from 2020 to March this year. The CPI measures the average change over time in prices paid by consumers for a basket of goods and services.
The report reveals several significant findings. Over the past five years, electricity prices rose by 68%, while water prices increased by 50%, both outpacing the general inflation rate of 28%. Rental costs for housing have increased moderately and remain below overall inflation. However, the cost of general practitioner services has risen significantly, which is concerning given that only 16% of South Africa’s population is covered by medical schemes.
Minibus taxi fares typically rise with petrol price spikes but rarely decrease afterwards. Funeral policies have remained significantly below the overall inflation rate, which is a positive sign for low-income households. Education costs have also seen sharp increases, with primary education inflation at 37% and secondary education inflation at 42%, both exceeding overall inflation.
The report provides an analysis of the pricing spread between retail and producer prices for various food items like brown bread, eggs, and sunflower oil. This spread indicates the percentage difference between what producers receive for goods and what consumers pay at retail. The Commission clarifies that this analysis is based on publicly available information and does not imply any anti-competitive conduct by individual firms.
While some staple items, such as canned pilchards, have shown responsible pricing at the retail level, other essential food items exhibit patterns of price stickiness and widening retail margins. Observations indicate that the recovery of South Africa’s egg market has been uneven, and rising producer prices may raise concerns.
The report also highlights the stability of retail margins for individually quick frozen chicken, which have remained under 40%. However, the spread between farm and producer prices for brown bread has increased to 77%, above historical levels. This suggests that while retail prices for brown bread have adjusted, retailers have absorbed some increases in producer prices.
Overall, the COL report serves as a valuable resource for the public, businesses, and policymakers by offering a comprehensive view of current economic conditions. By identifying the key drivers behind the cost of living crisis, it helps in understanding where anti-competitive practices may exacerbate the costs of essential goods and services.