Food price fight at odds with free trade?

2009-02-01 00:00

KWAZULU-Natal MEC for Agriculture and Environmental Affairs Mtholepi Mthimkhulu has emerged as an unlikely champion of the consumer.

At issue are persistently high supermarket shelf tags that buck the downward trend of the fuel price, and that after the succession of fuel hikes last year were blamed for soaring food prices.

Mounting public pressure led to righteous calls for action and paved the way for a food price summit attended by representatives from throughout the supply chain.

The MEC seized the initiative and had corporate retailers scurrying for their burrows with two whammies: a call to cap certain staples, and asking why the grocery and fuel price graphs show such variance.

“Now that we have witnessed the decrease of fuel prices, why shouldn’t food prices decrease too?” he said.

Predictably, Mthimkhulu’s attack on the soft underbelly of heavily capitalised retail infrastructure did not go down well with some chains, which accused him of “political interference”.

Spar group marketing director Roelf Venter said that fixing food prices is in conflict with the principles of the free market system, while Shoprite marketing director Brian Weyers said that prices are determined primarily by supply and demand.

Weyers was absolutely right when he said that the retail market is “fiercely competitive”, but the fact is that price competitions between retail chains are of marginal benefit to the consumer. Frankly, a shop advertising a 10 cent saving on a tin of pilchards does nothing more than throw out bait on a line, hoping the customer can be hooked, and perhaps spend more on other items too.

Perhaps the tide is turning, and consumers are becoming more critical of spurious claims that retailers — and wholesalers — are saving them money when they advertise their discounts in glossy brochures.

Mthimkhulu might have fingered the retail sector, but he really was placing a new agenda on the table — that of a more creative food distribution paradigm.

We can but speculate, but such a model presumably needs to challenge traditional “supply and demand” orthodoxies and factor poverty into its cost accounting. Whether such a model exists we don’t know, but locally Pick ’n Pay has picked up the baton by summoning its suppliers for an honest one-to-one.

CEO Nick Badminton shone some light on the stresses and strains in the distribution and supply dynamics of the food industry, saying: “… in many cases, we are being asked by our suppliers for considerable cost price increases”.

These, he said, were “untenable, and in the case of our customers and the media, indefensible”.

Wouldn’t it be nice if we were to know which suppliers are the greedy ones?

Bouquet for Ready Eddy

THE chief buyer for Pick n Pay in KwaZulu-Natal, Eddy Reddy, received a huge bouquet from a city resident who approached the provincial HQ after an unsatisfactory encounter at the Liberty Midlands Mall outlet.

Unhappy with the answer about the availability of an instant meal snack on promotion, the customer vented her frustration to Reddy. He apologised and, having taken it upon himself to find out the real story, phoned back to tell her that the product was to be found at the Montclair outlet, and that it would be driven to the Midlands Mall branch.

And by the time our vindicated consumer tucks into her Thai rice meal-for-one, she would have had plenty of reason to share the experience with her many friends.

Brickbat for Spar

THE Jonathan Spar outlet in Mayor’s Walk serves a loyal patronage that supports the outlet more for its convenience than the product lines.

Our delighted surprise then when we saw a plastic sachet refill for Douw Egberts coffee — at last, a respite from the mounting collection of empty glass jars with lids — and at a R10 reduction!

But our joy was short-lived when one day, the shop stopped stocking the refill.

We made inquiries to both managers at different times, and pointed that the R10 price difference would warrant a stop elsewhere in town for our daily bread and milk. Ten days later, we’re still waiting …

Themed approach

THE Alan Gray crowd has come up with a sensible approach to long-term investment in an open economy such as in South Africa. Their views are based on whether certain facets of the economy are in balance or not, and either sustainable or not, in the long run.

The first theme is the deficit on South Africa’s current account that is close to a record high in relation to our country’s GDP. Despite the credit crisis and consumer reigning in, we’re still living beyond our means. We’re taking more from the rest of the world than we are giving back to it, and this can last for as long as the rest of the world believes that one day we will be willing and able to give back more than we are taking.

This task will be made easier if we invest more in future productive capacity and less on current consumption. But delayed gratification is not all that popular.

The second theme is the value of paper money, with the key lesson provided by the Mugabe regime. Having discovered that it could no longer make ends meet, it resorted to printing more money. The consequences are severe, including igniting a hyper-inflation cycle.

Some say American monetary policy is not much different and that America can get away with “quantitative easing”, or printing money, for longer only because the dollar is the world’s reserve currency. But it cannot continue indefinitely, which may explain gold’s silent lustre .

Wheels fall off

AS was predicted before the Asian flood of motorised imports, the bad times would see them scurry back, leaving local motorists to deal with very long supply lines.

The latest casualty is the liquidated importer of Chinese-built Geely cars that sold a range of budget sedans through a network of 29 dealers. In its heyday, talk was confident of bold plans to start up local production.

The Geely liquidation follows the exit of the Spanish Seat and Chinese Meiya brands, while Combined Motor Holdings (CMH) significantly scaled down its Mandarin Motors operations, which sells Soyat double-cab and special utility vehicles.

No wonder there is growing market speculation about the financial health of some other smaller vehicle importers and distributors.

Last word

A MEDIOCRE idea that generates enthusiasm will go further than a great idea that inspires no one.

—Mary Kay Ash.

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