Abstract
The study examines the relationship between competition and the price of wheat flour through two approaches: first, by assessing the impact of competition on prices using fixed effects regression models; and secondly, by analysing the extent to which competition affects the passthrough rate of global supply shocks using difference-in-difference (DiD) regression models. The study finds that increased competition will likely promote lower prices under normal trading conditions and, in the case of a large value chain shocks such as the COVID-19 pandemic and the invasion of Ukraine, competition was associated with a larger passthrough rate for wheat flour. The study finds that although consumers in more competitive provinces experienced lower prices post shock, the impact was marginal from a financial and welfare perspective and that policy interventions, such as wheat reserves and production policies, may be needed to address South Africa’s vulnerability to global speculative pricing.