South African eggs rationing warning

The Competition Commission supports the rationing of eggs and chicken, but experts warn it can lead to serious problems.

Over the last few weeks, an avian flu outbreak in South Africa caused egg and chicken shortages nationwide.

In response to these shortages, retailers like Woolworths and Pick n Pay are rationing the amount of eggs consumers can buy.

Woolworths said it was experiencing significant supply challenges and has, therefore, implemented a limit on whole egg purchases.

Pick n Pay said it was limiting purchases to one or two egg packs per customer, depending on the region.

James Hodge, chief economist and acting deputy commissioner at the Competition Commissioner, welcomed the decision to ration eggs and chicken purchases.

He told eNCA that during supply shocks, as is the case with chickens and eggs, rationing is preferred over increasing prices to decrease demand.

He added that South African courts also support rationing as it is more socially equitable. “If you increase prices to decrease demand, only wealthy people benefit and have access,” he said.

“Rationing is a proper response. We need to ensure good distribution to retailers serving lower-income communities,” Hodge said.

“Eggs and chickens have become sources of protein for lower-income households. It is a crisis for the poor more than anyone else.”

Hodge’s argument may seem intuitive, but disrupting free-market principles can have dire consequences, hurting the poor more than anyone else.

Merchant West Investments fund manager Piet Viljoen said rationing is always the place to which price controls will take you.

However, when prices stay too low to incentivise new production, shortages will become permanent and black markets start developing.

“When this happens, only the well-off will have access to the product, and the poor will get nothing,” Viljoen said.

“Communists, like the people at the Competition Commission, always think they can substitute regulations for market signals, like prices, and they always fail.”