South Africa’s average food basket cost 7% more in June 2021 compared to the same period last year, an analysis by professional services firm PwC shows.
Based on data published by Statistics South Africa, the calculations show that the cost of cooking oils (e.g. sunflower and canola) increased by 16.1% in the first half of the year following last year’s poor harvest of oil-producing crops.
Frozen chicken portions cost 8.7% more by June, while prices for vegetables like beetroot, carrots, cucumbers and spinach all increased by more than 10% in 2021 so far due to various factors.
However, the biggest offender is mutton/lamb, which has increased by 36.8% in the six months to June.
Other major offenders include Spinach (+20%), margarine spread (17.6%) and eggs (17.5%).
There was growing concern from mid-July that the supply-side shock caused by the unrest (supply chain disruptions and the theft and/or damage to stock) would result in further price increases on food and consumer goods, PwC said.
In the third week of July, shortly after a peak in the unrest, the Pietermaritzburg Economic Justice Group (PMBEJD) noted feedback from the focus groups it uses to collect price data that the cost of basic food and consumer goods had increased sharply.
The group collects monthly price data on 44 food items from a team of women living in low-income areas of affected cities like Durban and Pietermaritzburg.
These developments have certainly influenced inflation expectations, PwC said.
“This, in turn, is important for the interest rate outlook.
The South African Reserve Bank (SARB) bases its monetary policy decisions on forward-looking price data. This includes the central bank’s own inflation projections and the quarterly Bureau for Economic Research (BER) Survey of Inflation Expectations.
In the Q2 2021 edition of this report, survey respondents reported slightly higher inflation expectations. Business leaders expect inflation to average 4.5% during 2021-2022, which is marginally above the analyst mean of 4.4%.
By comparison, Trade union officials anticipate a slightly lower inflation rate of 4.2% over the same period. PwC said it is uncommon for labour representatives to have lower inflation expectations compared to the private sector.
PwC currently expects an average inflation rate of 4.3% over the two-year period with upside risks in the near term stemming from supply chain disruptions.