/ 15 March 2024

Food prices top minimum wage growth

File photo by Delwyn Verasamy/M&G

The cost of making maize meal porridge has exceeded the growth in minimum wages, making it difficult for vulnerable households to put this basic foodstuff on the table, a new research report says.

An index developed by the Centre for Risk Analysis showed that there has been a “consistent upward trend in the total cost of maize meal porridge”, which went up by 32.9% from January 2020 to January 2024. 

But the minimum wage has risen by 22.5%, from R20.67 an hour to R25.42 an hour, over the same period, the report said.

The index monitors the fluctuation in prices of all the key ingredients that people use to make the porridge — maize meal (30kg), white sugar (10kg), salt (1kg), full-cream milk (6 litres), margarine (1kg) and peanut butter (two x 400g). The total monthly cost for all the ingredients that go into making the porridge is R729.90.

These findings highlight the real daily effect of food inflation on low-income households, and support the latest data from Statistics South Africa, which showed that headline consumer inflation rose to 5.3% year-on-year in January from 5.1% in December. Food and non-alcoholic beverages were the main drivers, increasing by 7.2%.

The risk analysis centre developed the maize meal porridge price index using monthly food price data gathered by the Pietermaritzburg Economic Justice and Dignity Group’s household food basket survey to determine the effect of food inflation on poorer households.

This basket consists of specific foods and quantities that women from an average low-income household, typically consisting of seven people, aim to buy monthly.

The index points to a continuous annual increase in the total cost of maize meal porridge — but the rate has been slowing.

“The index reached its peak of 15.7% in February 2023. This trend, if sustained, promises some respite for consumers who grapple with soaring fuel prices, widespread unemployment, frequent electricity outages and a stagnant economy,” the report said.

“The … index lends credence to the notion that food inflation might have reached its zenith in early 2023 and is poised to gradually recede throughout the year.”

The data shows that the price of maize meal decreased by more than 5% from February 2023 to February 2024, because of favourable harvests and an anticipated global decrease in demand.

“Conversely, prices of the remaining ingredients have witnessed year-on-year increases, with peanut butter leading the surge,” the report noted.

Load-shedding remains a key driver of food inflation because many manufacturers resort to emergency diesel-powered generators.

For example, RCL Foods, which produces Yum Yum peanut butter, Selati Sugar and 5 Star Super Maize Meal, recorded a 33% rise in diesel consumption from 2018 to 2023. The price of diesel rose by up to 73% between January 2018 and February 2024.

“These escalating diesel costs have a cascading effect on food inflation, as retailers inevitably pass on the increased expenses to consumers,” the report noted.

It said a primary factor contributing to slow wage increases was low economic growth, which suppressed demand for labour, while inflation diminished the purchasing power of wages. In South Africa, the economy has grown by an average of less than 0.4% annually from 2020 to 2023. 

Economic growth is expected to reach 1.3% in 2024, according to a recent treasury forecast.

“In addition to inflationary pressures, businesses encounter challenges in augmenting their revenues and profits in a low-growth scenario. Consequently, they may exhibit reluctance to increase wages for their workforce, leading to stagnation or sluggish growth in wages, as many employers find themselves less able or willing to offer raises or bonuses,” the report said.

As a result, low-income households have underspent on basic nutritious food since October 2020 and have resorted to less costly alternatives, which are often processed and unhealthy. 

Graphic Maize Website 1000px

The index “highlights the extent of the national food crisis” and the need to make nutritious food more affordable, said Liezel Engelbrecht, the innovation manager at the DG Murray Trustt, a foundation focused on investing in society to effect systemic change and reduce inequality, including food insecurity.

She said 30 children in South Africa die a day from malnutrition-related causes and one in four under the age of five are nutritionally stunted. 

Data from StatsSA shows that 20% of households report inadequate food, with more than “half a million of these households having children aged five years or younger”, she said, adding that the index shows that the price of maize meal is about 15% higher than it was in 2021.

Yet retailers and manufacturers are reporting high profits year-on-year, according to a 2023 Competition Commission report.

It says the cost of white maize has decreased by 23% since February 2023 but the prices set by maize meal producers — the price at which they sell their product to retailers — has fallen by only 1%.

“In addition, the proportion of the producer price that can be attributed to the farm value, the cost of the white maize, is the lowest since December 2021. This indicates that the price producers charge retailers is not directly linked to the cost of production but rather the need to make a profit,” Engelbrecht said.

This reduction, she said, has not been fully passed on to consumers, “highlighting issues in the pricing dynamics along the supply chain from farm to consumer”.

She urged the government, food producers and retailers to bring down the price of 10 budget-friendly food items that are the basis of a nutritious diet.

“While including staple starches, such as maize meal, the focus should also be protein-rich foods, such as dried beans and tinned fish, which are essential for the growth and development of children,” Engelbrecht said.