The latest Household Affordability Index by the Pietermaritzburg Economic Justice & Dignity group (PMBEJD) shows that food prices dropped in November 2021, following steep price hikes in October.
The civil society initiative’s data showed that year-on-year basket prices have increased by 6.3%, outstripping headline inflation.
Statistics South Africa’s latest Consumer Price Index for October 2021 shows that headline inflation is 5%, and for the lowest expenditure quintiles 1-3, it is 6.5%, 6%, and 5.2% respectively. CPI Food inflation is 6.7%. The Producer Price Index for October 2021 shows that agricultural inflation was 8.7%.
The key point of contention around inflation figures is that salaries and wages are negotiated around headline inflation. The national minimum wage is often only increased by headline CPI, and social grants have more recently been raised at rates far lower than CPI.
This creates a scenario where the amount coming in, does not match the rising costs of basic living, pushing the poorest further into poverty.
In November 2021, the average cost of the Household Food Basket was at R4,272.44 – down R45.11 (-1%), from October.
Year-on-year, the average cost of the food basket increased by R254.19 (6.3%), from R4,018.25 in November 2020, and the overall basket cost is R416.10 (10.8%) higher than September 2020, when the basket was first tracked.
The basket comprises 44 core food items most frequently purchased by lower-income households, who make up most households in the country. Nineteen of the 44 foods came down in price over the last month; 15 foods increased, and 10 were flat.
These were the most significant changes, where prices increased or declined by 10% or more.
Food prices October 2021 to November 2021 – big changes
Food prices November 2020 to November 2021 – big changes
Year on year changes are more significant, the group’s data shows, with the same basket costing 6.3% more – higher than headline inflation.
Beef liver: +29%
Cooking oil: +27%
Chicken livers: +26%
Sugar beans: +19%
Frozen chicken portions: +10%
Green pepper: -12%
The difference in cost of the total household food basket in Joburg, Durban and Cape Town is consistent at around ±R150. Springbok and Pietermaritzburg tend to be outliers in the data (Springbok being highest, and Pietermaritzburg being lowest). The average cost (weighted) of the total household food basket in November 2021 is R4,272.
Households in Joburg saw higher vegetable prices, cooking oil and bread in November. The declines for baskets in other major metros were off very high spikes in October, mostly driven by seasonal changes in vegetable prices, and the delayed run-through of the electricity price increase.
“The decline in prices in November are inconsistent with past trends, albeit in most cases the decreases were less than the spikes a month earlier,” the group said.
“The continuing run-through of higher electricity prices in the long value chains, along with the cost of alternative supplies when electricity is not available; the steeper fuel price hikes and higher cost of transportation; and the weakening rand (which substantially increases the costs of agriculture as a very high proportion of inputs are imported) – all work to drive food prices upwards.
The Brent Crude oil price – while weakening recently amid concerns of renewed global lockdowns, and if heeded may reduce global production and trade – still presents an upside risk. Last week the Reserve Bank increased the repo rate, which will also put pressure on debt servicing, and further drive prices upwards, the PMBEJD said.
“Our analysis is that food prices will continue their upward trajectory for the foreseeable future,” it said.
Persistently high prices
Analysts have warned that the steep price hikes in fuel coming this week will have a significantly detrimental impact on consumers in the coming months. Retailers and all stakeholders along the value chain will see a sharp rise in businesses costs, which may invariably be passed on to consumers.
“We know that salaries and wages are not keeping pace with these increases, and these increases will have a knock-on effect for all consumers,” said the Automobile Association’s Layton Beard.
The situation in South Africa reflects the trends being seen across the world, with a new report from Dutch multinational banking and financial services company, Rabobank, pointing to persistently high food prices.
According to Bloomberg, food prices are likely to stay near record highs next year due to consumers stocking up, high energy and shipping prices, adverse weather and a strong dollar.
“Inflation in this space is almost certainly not just temporary,” Rabobank analysts said. Next year “will likely bring fewer Covid-related disruptions, but when it comes to agricultural commodity prices, any sense of normalcy looks unlikely.”
A United Nations index that tracks staple foods is at a decade high as the food supply chain has been hit by bad weather, supply disruptions and labour shortages. That’s spurred inflation around the world, causing a headache for central bankers and governments.
Disruptions and prices should ease next year, but only slightly, Rabobank said, adding that high costs of food may lead to social upheaval. “Social discontent is already being felt in a few countries, and more is likely to come in 2022.”
Article written by: Businesstech
Photo credit: TimesLive