Recently the humanitarian organisation Black Sash presented a submission to the Competition Commission Tribunal on the bread price-fixing scandal. We were motivated to make the submission because the price of bread particularly affects those at the lower end of the socio-economic scale for whom bread is staple food.
It is important to remember that the fixing of bread prices and cartel activity takes place in an environment of high levels of unemployment, low wages, the sharp decline in purchasing power, rising fuel prices, high interest rates and chronic poverty. It takes place in an environment where food security in poor households is declining.
How many loaves of bread has this cartel activity taken away from the mouths of schoolchildren who are dependent on the school feeding scheme for a daily meal? How many households had to go hungry for days because there was not enough money to afford basic foodstuffs as a result of this activity?
South Africa’s high poverty levels are linked to structural unemployment and perpetuate the inequalities of the past. Cartel behaviour undermines the efforts of government to provide comprehensive social security and employment. There is no dispute that cartels destroy competition, causing serious harm to the economy and consumers. This unscrupulous practice clearly pushed up the price of bread to the detriment of consumers, but more disconcerting is the fact that these practices extended across the country for 12 years.
The administrative penalty of more then R98million — which represents 5,7% of Tiger Brands’ turnover from its bakery operations nationally for the financial year ending in 2006 — is a mere slap on the wrist and does not reflect the seriousness of the infringement.
As companies venture further into uncompetitive and unethical behaviour in pursuit of profit, it is not inconceivable that a penalty of one year’s portion of a company’s turnover poses little threat and is therefore unlikely to deter firms from engaging in anti-competitive practices.
The magnitude of the effect of price-fixing on poor households suggests this is not a victimless crime. The Competition Act must be revised to strengthen the hand of the commission, not only to address unfair business practices, but also to deal with unethical behaviour. We will argue that a revised Act must make provision for the personal liability of company directors who should be punished for their misconduct.
Black Sash’s work in the area of consumer protection closely complements our work in social protection.
The government has recognised the close link between social security and the price of food. Finance Minister Trevor Manuel’s medium-term budget policy statement set aside about R4,3billion of public money to compensate pensioners and social grant beneficiaries for rising food prices and other cost-of-living increases. This is based on the government’s recognition that social grants are significantly and positively associated with a greater share of household expenditure on food.
It has been noted that poor people with HIV/Aids or TB benefit more from their treatment if they have the necessary nutrition to support the medication they receive. With all our minds focused on the scandal of food price-fixing, let us not forget that the country needs to establish a sustainable social protection system for all our people.
Nkosikhulule Nyembezi and Elroy Paulus are Black Sash national advocacy officers