South Africa’s consumer food price inflation decelerated significantly to 2.8% in October, the lowest level recorded in more than five years, signalling a possible respite for households burdened by rising costs.
This substantial decline from September’s 3.8% offers a glimmer of hope, particularly for lower-income families who often have to choose between pricier options and budget-friendly substitutes.
Wandile Sihlobo, chief economist at the Agricultural Business Chamber of SA (Agbiz), noted that the decrease was the most significant since May 2019, showcasing a broad-based slowdown in food prices, except for “sugar, sweets and desserts,” which experienced a slight uptick.
The overarching reduction in inflation was largely attributed to base effects; last year’s elevated food prices were driven by a myriad of factors including India’s rice export ban and an Avian Influenza outbreak that tightened egg supply. With these issues largely resolved, food prices have stabilised.
“We are far from that worrying reality as India has resumed rice exports and prices have generally cooled,” Sihlobo ssaid.
“Additionally, South Africa's poultry product supplies have normalised, and improved vegetable supplies across fresh produce markets have also contributed to the easing of prices.”
He also highlighted that a decline in wheat prices had played a role in moderating costs, painting a cautiously optimistic picture for consumers.
Nevertheless, Agbiz cautioned that the grain-related products still pose an upside risk to future consumer inflation due to a poorer-than-expected 2023-24 maize harvest, estimated at 12.72 million tons—down by 23% from last year.
This setback is primarily a result of the mid-summer drought affecting key growing areas for white maize, a staple crop that is now also scarce on the global market. Consequently, white maize prices have surged in recent months.
“The ongoing demand for white maize from neighbouring Southern African countries through early 2025 adds to the complexities,” Sihlobo added.
Yet, he voiced optimism that potential price increases for grain-related products may be modest, buoyed by favourable forecasts of ample global wheat and rice harvests in the upcoming 2024-25 season.
Zama Sangweni, economist at Absa AgriBusiness, echoed these sentiments, highlighting how slower price increases for essential categories such as bread, cereals, and vegetables led to the noteworthy dip in food inflation.
“Tomatoes and onions saw increased supply due to favourable harvest conditions, significantly aiding the downward trend in vegetable prices,” Sangweni said.
However, as the year draws to a close, she also acknowledged seasonal demands might bring slight price rises in the fourth quarter, even with the base effects suggesting a lower overall food inflation rate by year-end.
“The traditional spiking demand over the festive period may challenge the current softening of prices,” she said.
Daneel Rossouw, head of sales agriculture at Nedbank Commercial Banking, emphasised that while the lower inflation rate was encouraging, potential risks loom on the horizon, particularly due to the reduced grain harvest from the summer rainfall areas.
Rossouw said this could have cascading effects, especially for white maize—a crucial food staple.
“Additionally, with shifting US economic policies, ongoing international geopolitical tensions, and looming possibilities of increased electricity tariffs, the landscape for South Africa’s food inflation remains precarious,” Rossouw said.
BUSINESS REPORT