Mozambique | Prices higher than in South Africa

View of Maputo, Mozambique

Price differences of various food products in the cities of Maputo and Nelspruit, South Africa, have shown the existence of an excessive profit margin in the Mozambican market, according to a study released yesterday in Maputo.
The study entitled “Price Variations in Mozambique”, carried out by the Program for Economic and Enterprise Development (SPEED), US organization USAID, in partnership with the Confederation of Business Associations (CTA), said that this excessive mark up even exists in supermarkets operating in both countries.
Assessing the price of eight products – sugar, chicken, corn flour, tomato, cooking oil, baked beans, tomato paste and canned tuna – the analysis sought to explain the reasons why Mozambican consumers purchase goods in the city of Nelspruit, in the border province of Mpumalanga, located about 200 kilometres from the Mozambican capital, despite a growing supply of goods to the Mozambican market.
Despite not indicating the composition of a possible basket of goods, the authors concluded that travelling between the two countries to purchase goods could lead to savings of at least USD82, taking into account the cost of travel in a utility vehicle, which is around the same amount.
By operating in the two cities, supermarket chains Game, Spar and Shoprite were selected to serve as a comparative reference, said the study, which is now available on the SPEED program’s website.
With profit margins ranging from 81 percent to 92 percent in the case of processed foods (baked beans, tomato paste and tuna) and up to 50 percent for basic foodstuffs (the remainder, according to the classification of the Mozambican authorities), the study shows that the price differences are greater than transfer costs from one market to another.
“The price difference is large enough to cover the costs of trade, including import duties and applicable sales tax. In the case of a formal retailer, this includes potential customs delays costs, and compliance with sanitary and phytosanitary requirements, among others,” noted the authors.
The analysis also showed that the devaluation of the South African currency, the rand, against the metical, which has been observed continuously over the last two years (currently one rand is equivalent to about 2.7 meticais) is not being reflected in the price of products imported from South Africa, indicating an increase in the profit margins of retailers.
In terms of the reasons for the profit margins of retailers operating in the Mozambican market, the study notes the cost of renting commercial space, “which is four times higher in Maputo,” as well as rates of corporate tax, which “is four percentage points higher.”  MDT/Macauhub