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Inflation continues to bite as food prices ease

Mercury logo Mercury 2018-09-11 Lyse Comins
a store filled with lots of food: Food prices have not yet been hit hard by fuel price increases. Vivek Prakash/Reuters/African News agency (ANA) © Provided by Independent Media Food prices have not yet been hit hard by fuel price increases. Vivek Prakash/Reuters/African News agency (ANA)

Durban - Consumers have had some reprieve with lower food price inflation in recent months, but the effect of the recent raft of fuel price increases and the weakened rand is expected be felt as inflation bites in the coming months.

Consumer groups have also expressed concern that lower to middle-income consumers are battling to make ends meet as households absorb the spiralling inflation of administered prices such as education, fuel, electricity and water costs.

Pietermaritzburg Economic Justice and Dignity’s (EJD) latest Household Affordability Index for August showed the cost of a basic basket of groceries decreased over the past few months, although the cost of some individual items increased for the period. The basket, which includes 38 basic food items in quantities regularly purchased by lower income households decreased by R30.32 (-1.0%) to R3009.65 last month.

Some of the items that increased in price over the period included 10kg butternut, 25%; 25kg and 10kg maize meal, 2%; 6kg tomatoes, 5%; 5l cooking oil, 5%; 10 onions, 7%; 10kg frozen chicken portions, 2%.

The basket decreased by R40.93 (-1.3%) from R3050.58 in June.

Also read: Another fuel price hike expected in October

However, EJD researcher Julie Smith said the impact of recession and recent fuel price hikes would filter down to food prices in the coming months. She said transport and electricity also formed a large portion of the expenses of lower income households which were battling, while electricity costs comprised about 11%-13% of the budget of middle-income homes.

“The middle class is already under financial pressure and also has expenses like paying off a bond and the cost of sending children to a decent school. The middle class is already being squeezed and the projection is that things are not going to change for the better any time soon,” Smith said.

Middle-income households would dip into savings to pay for higher food prices or they would reduce the variety of food on their plate, such as cutting out certain proteins. “The reason we are a struggling economy is because if consumers can’t spend we can’t drive the economy,” Smith said.

SA National Consumer Union vice-chairman Clif Johnston said the technical recession had resulted in a further decline in the value of the rand which has lost 25% of its value against international currencies over the past six months.

“The cost of imported foods will rise by a similar percentage once existing stocks are depleted, unless the rand appreciates back to its earlier levels soon. The foods most affected by this are in the luxury category, although items such as tinned tuna, popular among the poor, will also be affected,” Johnston said.

“Imported dairy products have been providing strong competition and keeping local prices down in recent times, so we may see a rise in the price of local dairy products to match the price increase of the imported products.”

Also read: 3 reasons why farmland prices dropped 32%

Johnston said food price inflation had overall remained in line with inflation partly due to a major decrease in the price of maize and other cereals following the breaking of the drought in large areas of the country. According to the National Agricultural Marketing Council’s latest Food Basket Price Monthly report, food inflation was 3.4% during July, while headline CPI increased to 5.1%.

“Another factor is increased consumer resistance to food price increases resulting from other pressures on their wallets.

“These other pressures come mainly from administered prices (fuel, transport, electricity, water) which have increased at nearly two and a half times the inflation rate over the 12 months to July 2018 according to Statistics South Africa,” Johnston said.

“Consumers have little option but to pay these increased tariffs, so they must economise elsewhere. Sadly, for many, this means buying less food,” he said.

FNB senior agricultural economist Paul Makube said the country had produced a bumper crop of 17.66 million tons of maize in 2017 and the current harvest was expected to yield 13.8million tons, which is above the long term average of 12.5 million tons.

The Mercury

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