South Africa food price warning

South Africa’s food prices will continue to rise towards the end of 2023 as farmers deliver lower volumes of fresh produce to market than expected, while food processors and retailers have to deal with the rising cost of doing business.

Agricultural Business Chamber chief economist Wandile Sihlobo told the SABC that the declining volumes could be attributed largely to load-shedding and deteriorating infrastructure. 

“The major driver of rising prices is the lower volumes farmers are delivering across various fresh produce markets in South Africa,” Sihlobo said. 

“Farmers are delivering lower volumes because of the poor harvest in some areas. One can think of this as a consequence of the impact of load-shedding that negatively affected irrigation in some areas and crop quality.”

One example of the rapidly rising cost of fresh produce is potatoes, whose price has doubled in the past year. 

According to Potatoes South Africa, the average price of a 10 kg bag of potatoes has risen from R41 last year to above R80. 

Due to the low price of potatoes last year, farmers planted less and decreased their processing, reducing the supply of potatoes to the South African market. 

Coupled with high demand, the prices of potatoes have skyrocketed. 

Sihlobo is concerned that food producers and retailers will pass these prices on to consumers, eroding food security in the country and negatively impacting headline inflation. 

This fear may become a reality as South African retailers and food producers warned of rising food insecurity at the Consumer Goods Council’s annual summit earlier this week. 

Consumer Goods Council CEO Zinhle Tyikwe said the sector is under severe pressure from the rising cost of doing business in South Africa. 

Tyikwe said that members of the Council have spent R1.5 billion on alternative power sources since the intensity of load-shedding ramped up towards the end of 2022. 

“It has just become so difficult for businesses to operate in South Africa due to infrastructure challenges, crime, logistical inefficiencies, and load-shedding,” Tyikwe said. 

“We are finding that municipalities are struggling to remain functional and the basic services needed for food producers to operate.”

Tyikwe called on the government to work with the private sector to address the structural issues making it difficult for food producers to supply their consumers with goods. 

Speaking at the Consumer Goods Council’s annual summit, Pick n Pay chairman Gareth Ackerman echoed Tyikwe’s concerns that the cost of doing business has skyrocketed in South Africa. 

“The challenge is that the government is not doing its job properly, and we now have to help it in doing things for which we are paying tax for it to be done,” Ackerman said.

“We need to ensure water, electricity, potholes and sewerage are repaired and work. We have to deal with crime and poor service delivery. These are unbelievably depressing things, yet they are basics.”

He noted that the port and rail infrastructure is incredibly ineffective, forcing the consumer goods sector to use expensive road freight, damaging roads.

Business insurance has also increased nearly twofold following the 2021 riots, whilst salary and wage increases have not improved with the rising cost of living.

“It has become a lethal cocktail which needs to be adequately addressed by the government, working together with business to get things going on to grow the economy,” said Ackerman.