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Tuesday, September 06, 2016
In South Africa greedy businessmen in collusion and running cartels are driving millions of people into poverty.
The World Bank recently reported on its analysis of four of 70 cartels detected by the South African Competition Commission between 2005 and 2015. It shows that if cartels operating in the maize, wheat, poultry and pharmaceutical sectors were to be broken up, more than 200 000 people would be raised out of poverty. Cartels operating in the wheat sector overcharge on products by between 7% and 42%, in poultry [25%] and in pharmaceuticals [between 10% and 15%]. The inflated charges result in price increases in these sectors of an average of 10%. Products from these sectors make up a large proportion of the expenditure on food of the poor.
"Spending on wheat, maize, poultry and pharmaceuticals accounts for 15.6% of the consumption basket of the poorest 10% of the population," said the World Bank.
Spending on wheat-derived products accounts for the biggest portion of the basic-food costs of poor people. The World Bank, using data from the South African Income and Expenditure Survey of 2010-2011, said prices inflated by collusion led to poor households having to go without medicines so that they could eat.
Simon Roberts, director of the Centre for Competition, Regulation and Economic Development at the University of Johannesburg, said prices in South Africa, as internationally, were generally marked up by 15% to 25% more than if there had been no collusion. Food pricing expert Merwyn Abrahams, of the Pietermaritzburg Agency for Community Social Action, said a study that looked at the effects of food-price inflation on low-income households showed that last month the cost of their food basket increased by R318.67 compared to last year to R1,942.42 - its highest ever.
"Maize meal was the main driver of food inflation, with the cost of a 25kg bag increasing by 39.6% compared to last year," Abrahams said.
"The situation is really bad," said Competition Commission spokesman Itumeleng Lesofe. "There are cartels in almost every sector of the economy. The commission has uncovered cartels in food, infrastructure and construction, automotive, healthcare, financial services and energy."