Food prices up 9% over last 3 months
The price of the PACSA food basket increased by 9% (R148.94) over the last three months from R1 648.10 in November 2015 to R1 797.04 in January 2016. The month-on-month increases for Nov 2015-Dec 2015 was 4.01% and for Dec 2015-Jan 2016 was 4.8%. The average month-on-month increases from December 2014 to November 2015 were 0.52%. This means that the substantial month-on month increases we are seeing for the latest December 2015 and January 2016 food price data are eight times higher than the average monthly increases over the preceding 12 month period.
The year-on-year increase for Jan 2015-Jan 2016 was 14.6% (R228.79), from R1 568.25 in January 2015 to R1 797.04 in January 2016. A 14.6% year-on-year increase, coupled with the latest data of a 9% increase in prices on the food baskets of low-income households over the past three months suggests that food prices may increase beyond 15% in 2016.
The foods that are driving high levels of inflation on the PACSA food basket and which have seen significant levels of inflation over the last three months include rice (up 11.9% on 10kgs), cake flour (up 10.3% on 10kgs), samp (up 10.8% on 5kg); white sugar (up 5% on 10kgs); sugar beans (up 11.9% on 5kgs); cooking oil (up 23.3% on 4 litres); maas (up 6.3% on 2 litres); eggs (up 5.9% on a tray of 30); beef (up 8.7% on 1kg); potatoes (up 109.5% on a 10kg pocket); onions (up 65.9% on a 10kg pocket); cabbage (up 78.8% on 2 heads); spinach (up 82.5% on 4 bunches). The price of maize meal has stabilized off its high of R181.81 in November 2015, however is still 21.2% or R31.33 more than its January 2015 price of R147.82 per 25kgs. Tomatoes too have stabilized off their December 2015 high of R48.16 per 3kgs, to a lower R31.32. See graphic on page 2 for quick summary of all data referred to in January 2016 media statement.
The PACSA food basket is designed to track food price inflation on the food baskets of low-income households. The methodology employed, which selects prices on the basis of the most affordable and reasonable quality food on the supermarket shelf, acts to cushion against the sharper effects of price increases. The foods in the basket further have been carefully selected through rigorous conversations with women living in low-income households as being the typical monthly food baskets of low-income households. The supermarkets tracked further are those that low-income households themselves have identified as places where they shop. These 6 supermarkets serve the lower income retail market. Given the methodology employed in the PACSA food basket and the sharp increases in food price inflation seen in our latest sets of data; we suggest that food price inflation will affect low-income households severely in the coming months, with prices set to continue their upward trajectory.
The implication of substantial food price inflation in 2016 is set to exacerbate the already severe affordability crisis facing households, already under enormous financial strain. Food is typically one of the last household expenditures prioritized because it is one of the few expenses households can control. Transport (to get to work and school), education (so children can have a better future), electricity (to cook food, light houses, keep families warm and secure), burial insurance (so that family can be buried with dignity) and the repayment of debt to enable the securing of credit going forward are prioritized before food. Because food is last in the line of expenditure, the food budget is low and households underspend on food. In October 2015, PACSA’s research showed that households were underspending by 55.6% and taking on debt to cover food shortfalls.
This reality suggests massive ramifications for health and wellbeing; child development; productivity; education, health and economic outcomes; family functioning and social solidarity; and civil discontent and protest. High food prices, together with Eskom’s request for a 16.6% increase in electricity tariffs, the exponential water tariff increase, increased interest rates and excessive levels of indebtedness may have disastrous implications for South African society.
High levels of unemployment and low wages (and social grants) remove the ability of low-income households to absorb such extreme pressures caused by price inflation. Households, over the past years, have absorbed pressures through cutting back expenditures. This strategy is now reaching a critical point where many households are unable to cut back any further without seriously damaging themselves. For many, there is no longer a buffer against price inflation. We need to imagine a new economic model of dealing with our socio-economic challenges because we are moving from crisis to crisis, and for many households the buffer is now gone. With each crisis the impact is now more severe.
Extreme levels of food price inflation call on government to intervene immediately and decisively where they are able to. As a short term intervention within the current economic paradigm we have to find ways to put more money in the pockets of low-income households whilst ensuring that the costs of goods and services households require are reduced PACSA Monthly Food Price Barometer 2 in line with affordability thresholds. Social grant increases, due in February, will need to be increased in line with projected food price inflation for 2016 to allow households to afford a basket of sufficient and nutritious food and slowdown some of the negative ramifications. Dealing with the effects, longer term, the inequity in wages must be addressed, with the discussions around the National Minimum Wage fast-tracked and set at the level of a living wage. Public service tariffs and charges have long ago breached affordability thresholds; another immediate intervention to mitigate the effect of food price inflation is for NERSA to turndown Eskom’s latest application for a 16.6% increase and for municipalities to work much harder to structure their tariffs to allow for affordability at lower consumption volumes and enable cross-subsidisation.
We are moving from crisis to crisis, and shock to shock; these are a direct consequence of our current economic paradigm. We cannot address our challenges within this paradigm; we need to seriously explore a new economic paradigm that can afford each person a life of dignity.
For further info contact Julie Smith on firstname.lastname@example.org or 033 342 0052. All reports are available on our website www.pacsa.org.za.