No appetite for rising food prices

We are in the grip of a deepening food price crisis. Currently, most households struggle to pay for basic groceries. The expectation of further increases in food prices, coupled with impending tax hikes and fuel increases, threatens to push strained families further into poverty. The expected VAT increase set to take effect in a few weeks, coupled with a potential petrol price hike, will be another assault on the wallet.

Stats SA Consumer Price Index (CPI) reveal that food inflation has remained stubbornly high. In February 2024, annual food inflation was recorded at 6.1%, with staples like bread, cereals, and meat seeing significant increases. The Bureau for Food and Agricultural Policy (BFAP) warns that food prices could rise by another 5-7% in 2024, driven by a combination of local and global factors.

Some of the sharpest increases have been - bread and cereals (up by 8.3% year-on-year) - oils and fats (rising by 7.9%) - vegetables (increasing by 9.2%) - meat (up by 6.5%)

Several factors contribute to South Africa’s soaring food costs:

1. Global supply chain disruptions: The snowball effects of the Russia-Ukraine war continue to disrupt global grain and fertiliser supplies, pushing up the cost of wheat, maize, and sunflower oil. South Africa, which imports some of these staples, has seen prices surge as a result.

2. Climate change and local agricultural challenges: Droughts, floods, and erratic weather patterns have damaged crops, reducing local food production. The 2023/2024 El Niño weather phenomenon has worsened conditions, leading to lower yields for maize and other key crops.

3. Rising fuel and transport costs: Fuel prices directly impact food distribution costs. With another petrol price hike expected in May 2024, transport and logistics expenses will rise further, increasing retail food prices.

4. Currency depreciation: The weakening rand makes imported food and agricultural inputs (like fertilizer and machinery) more expensive, contributing to higher production costs passed on to consumers.

5. Load shedding and operational costs: Persistent load shedding increases costs for farmers, food processors, and retailers, who rely on expensive diesel generators to keep operations running. These added expenses inevitably trickle down to consumers.

6. The looming VAT increase: Another blow to households adding to the burden, the VAT rate is set to increase from 15% to 15.5% in a few weeks, with a further 0.5% next year, resulting in 16% VAT in 2026, which is likely to take money out of our pockets and contribute to an inflation increase of 0.3 to 0.5%. While some essential foods are zero-rated (meaning no VAT is charged), many everyday items will become more expensive. Zero-rated items are basic foods exempt from VAT, helping to reduce costs for low-income households. These include brown bread, maize meal, rice, dried beans, vegetables and fruit, milk, eggs, and lentils. However, many other essentials, such as white bread, margarine, tea, coffee, and processed foods - are taxable, meaning the VAT hike will directly increase their prices.

Another petrol price increase will burden our spending, with high food prices and higher inflation. Fuel increase may be a consequence of rising international oil prices and a weak rand. Transporters and retailers will pass these costs onto consumers, making groceries even more expensive.

Households currently experience unemployment at 32.1% (Q4 2023) and wages stagnating, and many families are forced to cut back on nutritious foods and opt for cheaper, less healthy options. Some may reduce meal portions or skip meals altogether. Many rely on credit or loans to buy food, deepening debt cycles with unscrupulous loan sharks. The various Social grants have been of some assistance to households. The Budget tabled in March 2025 speaks to the Social Relief of Distress (SRD) grant, scheduled to end shortly, initially implemented as a COVID-19 relief.  

The dramatic policy changes the USA is implementing under the Trump Administration will likely spike global inflation. Trump’s approach is to create a USA protectionist environment by imposing tariffs, forcing trading partners to do the same and pushing up the price of goods. Food insecurity is worsening, with 20.6% of South African households experiencing hunger (Stats SA, 2023).

There may be a few short-term solutions, but we could consider expanding the list of zero-rated food items to include more essentials like chicken, baby formula, and sanitary products. Implementing a subsidy on staple foods to stabilise prices. We should keep the Social Relief of Distress (SRD) grant and increase the value of all social grants to help vulnerable households cope with inflation, this could be funded by reworking the National Budget.

Our Long-Term Strategies could include substantial investment in local agriculture to reduce reliance on imports. Create programmes to improve energy resilience to mitigate load-shedding’s impact on food production. A culture of a home vegetable garden may assist with stretching a household's budget.

This food crisis demands immediate and urgent action. Rising food prices are not just an economic issue. They are a humanitarian crisis. With VAT and petrol increases looming, the situation will only worsen unless the government and private sector intervene. Without urgent measures, millions of our countrymen will be hungry, with devastating consequences for health, education, and social stability.

Advocate Lavan Gopaul is the director of Merchant Afrika.

** The views expressed do not necessarily reflect the views of IOL or Independent Media. 

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