Food price increases on the table for South Africa

Although South Africans have experienced relief from food inflation recently, experts expect prices to start increasing again in the coming months.

Anchor Capital economist Casey Sprake told Kaya Biz that she expects food inflation to slowly start to uptick in the next few months.

Fortunately, Sprake said that these increases will still not match the levels of inflation seen in 2022 and 2023.

In 2022, food inflation hit its highest level in years, 7.8%. Although it started coming down in 2023, it was only in September 2024 that food inflation fell below the 4% mark again.

In October, it dropped to 2.8% and increased marginally in the coming months.

Sprake explained that a big reason why food inflation has hit South Africa so hard is because the country relies heavily on imports.

Despite having a strong agricultural and farming sector, South Africa remains a net importer of food items, meaning we cannot produce everything we consume.

“As a result of that, we are very much beholden to the various dynamics globally, and that really impacts the food prices here in South Africa,” she said.

Sprake explained that a number of factors impact South Africa’s level of food inflation.

Firstly, geopolitical conflicts play an important role in global food prices.

In February 2022, Russia launched a full-scale invasion of Ukraine, which coincided with South Africa’s skyrocketing food inflation.

“That’s when we see instability in these international markets, especially in key producing regions such as Ukraine, for instance. It’s seen as the breadbasket of greater Eastern Europe,” she said.

“We see that filtering down. Uncertainty drives markets to speculate, which drives prices higher.”

“And, of course, most importantly, it has knock-on effects on supply chain levels, on global supplies, on getting good sending through.”

Sprake added that the Israel-Gaza conflict has had a similar effect because it has caused uncertainty around key logistical corridors along the Red Sea and the Suez Canal via Egypt, where many of South Africa’s international goods are routed.

That drives up the prices, not just for food items, but for all the inputs involved in farming processes.

“The global world is so interconnected when something seems to happen very far away, it really has an impact right down here for us in South Africa,” she said.

Sprake explained that US President Donald Trump’s return to the White House in 2025 could also hike food prices in South Africa.

Not only has his election sparked global uncertainty, particularly surrounding possible tariffs, but he has also been outspoken about his disagreement with certain South African policies, such as the country’s new Expropriation Act.

This poses a threat to the dollar-rand exchange rate, and since the country is so reliant on imported food products, it means that South Africa is very vulnerable to fluctuations in the strength of the rand.

Uncertainty surrounding the Government of National Unity (GNU) could also pose a threat to the strength of the rand this year.

Although the formation of the GNU improved sentiment about South Africa after the May 2024 elections, there are still doubts about the coalition’s longevity.

Fortunately, the rand is highly vulnerable to fluctuations in the exchange rate. Therefore, if the local currency does strengthen, it will offer notable inflationary relief for South African food prices.

“Looking ahead, the direction of the exchange rate really will be a key determinant of how our food inflation environment evolves over the coming months,” Sprake said.

“If we see these tariffs come into play that the US administration is threatening at the moment, that’s naturally just going to make everything more expensive across the globe.”