Consumers are angry that the government is treating them like a cash cow instead of fighting corruption and improving its fiscal discipline. File photo by Dwayne Senior/Bloomberg via Getty Images
South African consumers are struggling as spiralling food prices cut deeply into household budgets. This as lower global food prices and declining diesel costs have not yet trickled down to the local economy.
The food price pinch has prompted organisations to launch a campaign that calls on retailers and producers to cut the cost of 10 nutritious food items by waiving their profit. Doing so would make these basic items more affordable for poor people.
Food and non-alcoholic beverage price inflation has climbed over the past few years, hitting a four-month high of 9% year-on-year in November 2023. Meanwhile, headline inflation moderated to 5.9% year-on-year according to the latest Statistics South Africa data.
Analysts and social activists have raised concern that the domestic economy has not benefited from lower global food prices, which have declined markedly over the past 18 months.
Diesel prices have also dropped — by 15% since December 2022 to around the R20 mark — a development also not reflected in local food prices. Granted, the diesel price remains at a much higher level at 41% more expensive than in January 2022 when it was R12.40 a litre. But analysts say this should translate to lower food prices.
According to the National Agricultural Marketing Council’s latest Food Price Monitoring Report, an urban food basket of 28 items cost R1 221.52 in October 2023, representing a 10.1% annual increase.
Items that experienced price inflation of more than 6% included potatoes, bananas, black tea, white sugar, rice, polony, onions, instant coffee, cheddar cheese, apples, full-cream long-life milk, baked beans, peanut butter, chicken giblets, oranges, canned pilchards, cabbage, maize meal and individual quick-frozen chicken portions.
Similarly, the Pietermaritzburg Economic Justice and Dignity Group’s (PMBEJD) November 2023 Household Affordability Index shows the average cost of the household food basket increased annually by 9.9% to R5 314.63 in November 2023.
Based on Pietermaritzburg-specific prices, the PMBEJD found that electricity and transport costs take up 59.6% of a worker’s wage (R2 666.92 of the national minimum wage of R4 473.92). According to the report, people generally buy groceries after setting aside money for transport and electricity, leaving only R1 807 for food and everything else.
This means workers’ families will have underspent by a minimum of 51.3% on food in November.
The DG Murray Trust and Grow Great recently launched a national advocacy campaign to demand urgent action to make basic nutritious food more affordable. The organisations have called on food manufacturers and retailers to waive mark-ups on at least one product label of 10 nutritious “best buys”.
The best-buy items are eggs; dried beans and lentils; tinned fish; fortified maize meal; peanut butter; rice; amasi; soya mince; 4-in-1 soup mix and powdered full-cream milk. These items have been chosen because of their high nutritional value, provided at the lowest cost for families living below the food poverty line.
To offset any losses, the organisations have urged the government to show its support by providing a subsidy to retailers and manufacturers matching the value of their discount, said DG Murray Trust spokesperson Rahima Essop.
The National Economic Development and Labour Council is reviewing the policy’s viability, although the food industry has hesitated, Essop said.
“There is political support for the proposal, which has been included in the presidency’s draft Accelerated Poverty Alleviation Plan 2024 – 2030,” Essop said.
PMBEJD programme co-ordinator Mervyn Abrahams said a myriad of factors affect food prices. The effect of international ructions, such as Russia’s war on Ukraine, subsided in 2023 and fuel price hikes have stalled. But retail profit margins remained rigid.
“The Competition Commission, in its latest report, has been quite scathing, particularly of food producers and the retail sector, because they don’t lower their profit margins, even at times of great difficulty. And there is an argument to be made now that global geopolitical problems are not such a major impact anymore,” Abrahams said.
Consumers are facing an “affordability crisis”, he added.
“When fuel prices increase, we see an almost immediate increase in food prices but when petrol prices drop, we don’t see a decrease. And other arguments arise by retailers: ‘We have got to make up our wage bill and rent bill.’ But that is also factored into the margin, so prices should fluctuate,” Abrahams said.
“If there is an increase in a month in terms of a petrol price increase then there should be a drop when fuel prices drop.”
The UN Food and Agricultural Organisation’s monthly food price index has dropped 12.4% to 116 points since October 2022, reflecting decreasing global food prices.
Paul Makube, a senior agricultural economist at FNB, noted that global and domestic food inflation had diverged over the past 18 months.
Global food inflation remained in negative territory for the 13th consecutive month after falling by 10.7% year-on-year. But domestic food inflation remained sticky, clocking 9% year-on-year in November from 8.8% in October.
Makube said fruit and vegetable prices remained elevated, despite good harvests and Botswana’s and Namibia’s bans on South African vegetable imports, which ought to make these products cheaper.
He added that producer price inflation (PPI), the price farmers receive for produce, surged to 52.1% year-on-year in October 2023 — a new record, according to Stats SA.
“The fruit and vegetable PPI has trended higher at double-digit levels for the past eight months, as energy cost pressures with renewed intensity in load-shedding continued unabated. The dilapidated road infrastructure in the country accentuated the situation, increasing distribution costs,” Makube said.
Meat and egg prices had been affected by “massive challenges on the disease front”, including outbreaks of foot-and-mouth, bird flu and African swine fever.
Makube noted that fuel had become a huge component of processing costs due to load-shedding.
The delay in passing on the benefit of lower fuel prices could be because producers have had to recoup the earlier costs of not passing on excessive prices to consumers, he said.
A decline in fuel costs would help tame inflation in the near term, barring unexpected shocks.
Zinhle Tyikwe, chief executive of the Consumer Goods Council of South Africa, said the food value chain from the farm to retail faces cost pressures outside the control of farmers, food producers and retailers.
These include fluctuating fuel prices, the financial effect of load-shedding mitigation measures and the elevated cost of raw materials, affected by the rand’s depreciation against the dollar.
“There will always be a limit to how companies can continue absorbing these cost pressures without adjusting prices, even though they try to contain them as practically as possible,” Tyikwe said.