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Food inflation may be cooling but prices aren’t coming down fast enough

Food inflation may be cooling but prices aren’t coming down fast enough
Naledi Sikhakhane
By Naledi Sikhakhane
11 Oct 2024
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Workers unions lambasted the food industry’s ‘rocket and feather’ effect, saying that prices are quick to shoot up but slow to come down. The Competition Commission’s latest report reflects concern about high levels of food prices, and consumers struggling to absorb unjustifiable increases.

The Covid-19 pandemic continues to have long-standing effects on economies, food systems and food prices. This, along with other factors, has had food inflation as high as 14% in South Africa. But food inflation, along with consumer inflation, has been cooling since late last year, and is now at around 4%. 

Yet the Competition Commission’s latest essential food monitoring report suggests that food prices are not reflecting this drop, so consumers are not seeing relief. Civil society organisations have come out to condemn retailers for “keeping prices high while inflation, and other inputs are decreasing”.

“The rand is stronger, there has not been load shedding in over six months, and fuel costs have come down significantly. Yet despite this, retail prices for essential food items remain high” — Saftu

The competition commission states that “Since the publication of the last EFPM Report in May 2024, there have been several positive signs of easing food cost pressures throughout the economy. The challenge is to ensure these rapidly reflect in lower retail food prices rather than a ‘feather’ outcome where processors and retailers are slow to pass through cost reductions”.

A customer at a fruit and vegetables market in Durban city centre, Mthobisi Maphumulo, 27, said: “I’m lucky because I live alone, but I still spend so much on food; you walk into the shop with R1,000 and come back with only two plastics. I buy vegetables here in the market even though I sometimes get lazy to come and buy in the shop, which is more expensive.” 

Nomaswazi Dlamini, 31, told Daily Maverick she tries to buy in bulk to save but sometimes there is no money to buy in bulk. She is a cashier at a clothing retailer and has three family members. “Food is really expensive, even going for cheaper brands is not helping now; when it is month-end I take the papers showing the sales and then go buy in the shops that have sales or combo packages for rice, maize meal and oil. If I have those things at least we won’t go hungry before month-end,” Dlamini said.

Retailers not passing on cost easing


The South African Federation of Trade Unions (Saftu) strongly condemned retailers, in reaction to the report. “The Commission’s report stated that the cost pressures on food inputs have eased, but retailers are not passing on these prices to essential food items. Moreover, the purported main contributors to the increase in input costs have all eased: the rand is stronger, there has not been load shedding in over six months, and fuel costs have come down significantly. Yet despite this, retail prices for essential food items remain high.” 

Retail prices of maize, brown bread and tinned fish are on the rise. While farmgate prices for wheat have come down, the producer price of brown bread has increased. Furthermore, the producer price of cooking oil has dropped significantly, but this cost reduction is not reflected in the retail prices.

The Chief Economist of the Agricultural Business Chamber of South Africa Wandile Sihlobo wrote to Business Live saying that “households are generally under pressure, and the relatively higher food prices add to the difficulty”. 

Still, he says “it is wrong to accuse anyone of being responsible for higher food prices. The factors driving up costs are clear — among many others, we have had a drought that led to a poor harvest, higher fuel prices for much of 2024 and higher labour costs. Most agricultural commodity prices remain elevated, mirroring the effects of these factors”. 

‘Exorbitant earnings’ of retail execs


Saftu General Secretary Zwelinzima Vavi said the “profitability of the South African retailers, extracted from the working class both as workers through low wages, and as consumers through high retail prices, is reflected in the exorbitant earnings of the retail executives”.

In a recent report, the Pietermaritzburg Economic Justice & Dignity group (PMBEJD) demonstrated that minimum wage earners cannot afford the food basket. It further pointed out that the cost of the food basket has increased by 50% since September 2020. 

Read more: Food basket rises by R24 while grants increase by R10

47% of South Africa’s population relies on social grants — of whom 18 million are on permanent grants, while 10 million are on a Social relief of distress grant (SRD) of R370. Daily Maverick compiles a food basket of 14 basic items monthly and the basket has increased by more than R100 since 2022. It is sitting at more than R400, making it unaffordable for people who rely on the SRD grant.

“These are people whose meagre state-provided incomes the retailers are now fleecing with absolute impunity. South African retailers shamelessly engage in unscrupulous pricing methods in a country with 30% of the population living in poverty and in a country with 12.2 million of its population unemployed — 10 million of whom are on R370 SRD grants,” said a Saftu statement.

“The cost of living is high, but it is not out of our control. Supermarkets like Shoprite and big food businesses like Tiger Brands sell and produce our food and basic necessities. These big businesses make huge profits and can afford to reduce their prices. Big businesses control more and more of our food system, and some have profited at people’s expense, such as the bread price-fixing scandal.”

The General Industries Workers Union of South Africa (GIWUSA) said that the competition commission’s report vindicates their previous assertions on food price formation.

‘Food monopolies’ responsible for high prices


“This report vindicates that our position has been right all along; food monopolies are responsible for high food prices, and profiteer from the starvation, hunger and misery of the working class as it clearly states that the cost pressures on food inputs have eased, but the retail prices are not aligned to the cost of production. 

“The cost of fuel, being the main contributor, has been on a decline for five months now, and the currency exchange rate between the rand and the dollar has eased in favour of the rand, and power cuts have not been as rampant of late. Nonetheless retailers ignore these but will surely be quick to hike prices if the conditions change,” said the statement.

“This edition of the EFPM Report shows that although both overall inflation and food inflation have eased, food security remains a serious risk for consumers as price levels remain high relative to consumer income.” DM

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