South Africans spending less on food

South Africans are buying less food as their salaries cannot keep up with high inflation and interest rates.

This was revealed in PwC’s latest South Africa Economic Outlook report, ‘Towards greater food security for our people’.

The report showed that, in 2023, South Africans purchased 3.2% less food and beverages per capita as the buying power of salaries declined again.

Statistics South Africa showed that inflation-adjusted sales at general retailers – representing the retail trade of food and beverage products at non-specialised stores – declined by 2.2% in 2023.

When accounting for population growth of an estimated 1% during the year, PwC calculated that the volume of food and beverages sold per capita at grocery stores and supermarkets declined by 3.2% in 2023.

This decline in food and beverage sales volumes is strongly influenced by a weakening consumer buying power.

Salaries and wages increased by around 5.0% last year, while consumer price inflation averaged around 6.0%. This implies a one percentage point decline in buying power following the near three percentage point decline in 2022.

PwC said families also reprioritise their spending due to high interest rates weighing on their wallets.

For example, the prime lending rate increased by 475 basis points in the current monetary policy hiking cycle, causing monthly home loan repayments to be at least 40% higher than three years ago.

Increased monthly debt service fees would have diverted money from other spending categories like food and healthcare.

The financial strain caused by these and other structural factors – notably unemployment and poverty – resulted in two out of five South African adults needing to borrow money to purchase food in 2023, according to data from FinMark Trust.

Investec chief economist Annabel Bishop previously said South Africans are getting poorer as their take-home pay cannot keep up with inflation, negatively affecting their real spending power.

BankServ recently reported that average take-home pay lifted in March by 5.0% year-on-year versus February’s 4.6%. This is still well below the CPI inflation rate of 5.3% recorded in March 

In real terms, take-home pay fell by 0.4% year-on-year in March. While this is a modest drop on its own, it follows a negative 0.7% reading in February, with inflation a key factor in real salary and wage growth.

Bishop said 2023 and 2022 mainly saw real remuneration fall, weakening Household Consumption Expenditure (HCE) growth in real terms and, therefore, lowering economic growth outcomes. Both 2022 and 2023 were high-inflation years.

In addition, consumers have suffered from a high interest rate, tax, and unemployment environment, all of which have weakened consumer confidence. Interest rate cuts have been delayed, with the risk of no cut in 2024.

Debt Busters recently reported that, in Q1 2024, consumers increased their demand for debt management, with debt counselling inquiries up by 22% and online debt management up by 30% compared to the same period last year.

“Consumers are taking strain in South Africa, with financial vulnerability elevated,” Bishop said.