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Photo: Simphiwe Mbokazi
Pioneer Foods has agreed to reduce its profit margins on bread and flour as part of an unprecedented R1 billion settlement with the Competition Commission.
For years, South Africans have paid artificially high prices for bread and flour because of price-fixing and collusion by big companies.
The settlement commits Pioneer to reduce its gross margins by R160 million by adjusting its pricing on flour and bread, such as 600g and 700g standard white and brown loaves.
This, said Minister of Economic Development Ebrahim Patel on Tuesday, would “bring much needed relief to consumers who have paid above-competitive prices for bread and wheat products”.
“The free ride at the expense of consumers and jobs that some companies had for many decades in South Africa, is over,” he told Parliament’s National Assembly on Tuesday.
Patel called on bakeries and supermarkets to pass the windfall on to their customers and not use it as a chance to boost their own profits.
Pioneer Foods, one of South Africa’s largest food companies, was fined R195.7m by the Competition Tribunal in February this year for price-fixing.
The food giant, which includes Sasko bread and flour and Duens Bakeries, hit the headlines in 2006 when a small bread supplier in the Western Cape lodged a complaint about collusion by three bread companies to spike the price of bread.
Pioneer maintained that it was innocent right up to a hearing last year, while the other two, Tiger Brands and Premier, received immunity in exchange for testifying to evidence of a cartel.
According to the settlement announced yesterday, Pioneer is also committed to:
* Paying a R250m penalty to the National Revenue Fund.
* Paying R250m to an “agro-processing competitiveness fund”, to be run by the Industrial Development Corporation with the aim of boosting growth and employment through promoting competition in the food value chain.
* Increasing its capital expenditure of R1.2bn by R150m over the next two years. According to Patel, this was meant to encourage the company to improve its performance through innovation, expansion and upgrading, “instead of reliance on pricefixing and collusion”.
* Ceasing all anti-competitive conduct and implementing a competition compliance programme.
* Co-operating with the commission’s ongoing investigations and prosecutions in cases in which it is involved.
Competition Commissioner Shan Ramburuth said: “This agreement includes price adjustment for the benefit of consumers and a fund to promote competition.”
The settlement was lodged with the Competition Tribunal, which will decide on it in the next two weeks, Patel said. “I call on bakeries, supermarkets and the retail trade
to pass the price reduction on to consumers. Government wants to see that retailers do not divert price reductions into higher margins.”
He said the agricultural value-chain was being targeted as a key driver of new job creation. - Cape Times
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Dave, wrote
To Pangaman and all those. Before everyone gets their knickers in a knot, just stand for a moment and THINK. Has anyone ever heard of diversion tactics or laying a false trail? This country has become so behept with food prices, petrol prices,and more taxes, that they have forgotten and lost interest how on the quiet, while you have been absorbed by other things, the ANC has quietly condoned and swept under the carpet all the fraud within it's own ranks. Billions of taxpayers money "dissapearing" in home affairs, the police, education to name a few. 60% of police guilty of fraud and coruption-------- and put on FULL PAY suspension. WHY? Look at Yengeni, Malema ---- Why are these loudmouth arrogant fraudsters still allowed free reign? Just for a moment look past these red herrings what's really going on. POWER is the bottom line. None of the high profiles care a damn for the poor ------ only their own pockets. Look at the NEW cabinet. --- The gravy train gets longer and longer. Think the reshuffle and "firing will make a difference? they will still get fat salaries and payouts.
Anonymous, wrote
Well surely sound good but WHO is getting the money not the people have been paying the high prices all the time WHydont the compertition commission give some it to the PEOPLE as we have been effected by the prices , Also need to check the sunflower prices and the cement industry and coucils inflatting pices
BelgianExpat, wrote
assuming that every rand of benefit is taxed, am assuming that the government has been able to redistribute all these earnings to the poor?
Guyverxt9, wrote
Yes, something is seriously wrong here. I went to get the monthly basics. What cost me R700 last month, suddenly came down to R1000. And this is P&P!!! Guess somebody wants a FAT christmas bonus.
TK, wrote
This is the biggest load of rubbish I've heard in a long time. Asking a company to lower it's gross margins. There's a thousand and one tricks to arttifically lower margins. These guys should have been fined a gazillion rands and open up the market for more competition, made fines for collusion stiffer and the market would have taken care of the rest. This just shows the people in charge have never ever seen a single textbook on competition and strategy. These pioneer guys can easily squeeze their suppliers and their channels, etc. Even if there were any savings passed to the channels whats to say they will pass that to the consumer. This is what happens when politicians play economists. The only logical way to stop this collusion in these industries is prison terms for all those involved instead of such ridiculous so called corrective measures.
Lupercus, wrote
Now the government should take a close look at the major supermarket chains. The prices charged in these stores are so inconsistent it is almost laughable, if it were not so serious. When a litre of long life milk is sold for R6,99 on Saturday and is then sold for R7,99 or R9,99 on Monday then something is definitely wrong. This also applies to butter, margarine, sugar, and other basics. The practice of reducing weights and measures is something else that should be investigated. Bacon was 250 gms now 200 gms. Bread was 800 gms now 700 gms. These changes in weights also constitute a price increase which is being passed on to the consumer. Are these prices being upped to pay for adveritising and sports sponsorships? If so the tax rebates on advertising and sponsorships ahould also be investigated. Our econmony is going down the drain simply because of corporate greed.
Anonymous, wrote
What about the huge price we pay for cars in South Africa. Cars are manufactured in South Africa and sold at ± R50 000 more than the same car being exported to the uk is sold for, WHY ARE WE BEING RIPPED OFF! I am going to start keeping my till slips and I think make graphs of food prices to show how silently they just go up and up and up and up!!!!! Take a look at Kelloggs All-Bran, why must one pay R36 for a 750g of wheat flakes, what a rip off.
Douglas Hendry, wrote
Anonymous, wrote
PANGAMAN............You are dead right. Just a pity the poor who HAVE been stolen from will NEVER see a cent of it. Into Govt coffers it goes..........
Graham F, wrote
DaveyP, wrote
Wow, about 500 million bucks going into a National Revenue Fund. I bet the little piggies in Luthuli House are all happy with the knowlege that their gravy trough is going to get a massive cash injection which will allow them to go on a fat feeding frenzy.I wonder if its the same fund that all the money made from the levy on plastic supermarket packets goes into.Eat little piggies eat,stuff yourselves with all this lovely gravy.
Poor People Lawyer, wrote
While this is a good move,I think the competition commision is displaying open bias,there are only concentrating on very few easy to victimise industry while leaving the biggest perpetrators who are the mobile network operators namely MTN and Vodacom,This is where consumers have the biggest worry,there must address mobile network operators and banks...not to just waste energy with one sector
Pangaman, wrote
No industry should be allowed to operate without regulations, including the media. This is victory for all South Africans after decades of being swindled, robbed and raped financially by those who undermine the state and only think of making profits at the expense of the masses of our people. I am happy the ANC govt is really dealing with excesses and would love to see that happening in our criminal justice system, starting with corrupt police, prosecutors, magistrates and judges. The govt must be applauded for putting instruments in place to deal with these barbaric excesses by food producers. Come media tribunal, those who write stories must continue to write but must take responsibility and account for inaccuracies, be it due to negliegence or deliberate. Viva Competitions Tribunal!
Dodge, wrote
Good that they were fined, but it wont be long before there is a general increase and the price goes up again. There must be a better way of passing on the fine monies back to the community.
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