Bad news for food prices in South Africa

There has been a decrease in food prices through June in South Africa. However, the prices of basic staples remain stubbornly high with no sign of coming down soon. 

This is according to the Pietermaritzburg Economic Justice and Dignity Group’s (PMBEJD) Mervyn Abrahams, who spoke to Newzroom Afrika about food inflation in South Africa. 

PMBEJD’s food basket of 44 basic goods declined by R15 in June to a total price of R5,056. However, while the overall price declined, essentials such as maize meal, rice, onions, potatoes, and chicken remained high. 

Abrahams said that with the prices of these particular items staying high, households will continue to feel pressure in the coming months. 

South Africa is experiencing a peculiar phenomenon with high prices for food being driven by deteriorating infrastructure and intermittent power supply. 

Thus, while global food prices are declining, South Africa’s remains high and, in some cases, are increasing. 

According to Abrahams, South Africa has had consistently good harvests, and oil prices are declining, but many food prices are not declining. 

This is because food processors have to pass on the increased fuel costs to run generators during load-shedding and an inability to get their products to market. 

The South African Reserve Bank has also picked up on this strange phenomenon, with load-shedding making its fight against inflation more difficult. 

Food inflation reached a 14-year high in 2023, reaching 14% in March and showing no signs of slowing.

The SARB said this is due to structural issues in South Africa, such as load-shedding and deteriorating logistics infrastructure.

These issues and a weakening rand have meant that a global decline in food prices has not been felt in South Africa.

The broad-based nature of food inflation is more concerning, with 90% of the basket tracked by the Reserve Bank increasing above 6%.

Bread and cereals, for example, are up 20.3% compared to a year ago. However, this is likely to come down in the medium term.

Momentum Investments estimated that load-shedding alone will add 1.1% to inflation in 2023. This is mainly due to the increased costs of companies running generators as backup power sources.

Electricity generated by a diesel generator costs roughly 133% more than municipal electricity. These costs will be passed on to customers.