Load shedding ‘holiday’ spells good news for food prices in South Africa

 ·30 Apr 2024

Food price inflation in South Africa has dropped to the lowest point since September 2020, says Wandile Sihlobo, Chief Economist of the Agricultural Business Chamber of South Africa (Agbiz), and the outlook for the rest of the year could be better than expected, despite the risks from drought conditions.

This is thanks to lower levels of load shedding, now suspended for 34 consecutive days, which has allowed farmers to keep irrigating their crops.

Food inflation was recorded at 4.9% in March 2024, down from 6.0% in February.

“This is the lowest level since September 2020 and was underpinned by the deceleration across most food products, except for fish, which lifted mildly from the previous month,” Sihlobo said.

The economist noted that drought conditions in South Africa have raised concerns that food prices could take a turn for the worse this year, especially as heat and dryness have already impacted some key crops like white maize.

However, as most of South Africa’s crops are irrigated—and load shedding has been kept at bay and come in at much lower stages when it was in effect—vegetable and fruit production has not taken significant strain.

“Moreover, meat prices rose at the end of 2023 due to supply constraints of poultry products on the back of avian influenza – but there is now anecdotal evidence that the restocking process is underway and there is improvement in the poultry products supplies,” he said.

“Therefore, the risks of further price increases have subsided somewhat.”

But the impact on white maize is evident, he said, which presents significant upside risks for the “bread and cereal products” in the food basket.

“There are notable crop failures in South Africa’s western regions, primarily white maize-producing regions. We see similar challenges in some yellow maize, other grains and oilseed regions,” he said.

Aside from the domestic white maize supply challenges, though, there is ample wheat, rice, and vegetable oils on the world market—and the prices of these items have moderated due to increased global supplies.

South Africa, a significant importer of these products, is therefore in a better position overall.

Looking at the bigger picture, Sihlobo said that even though there is increased uncertainty about South Africa’s consumer food inflation path for 2024—with some upside risks in various products—the outlook remains optimistic.

“The underlying factors are not all one-sided, and one has to reflect on the price movements and weighting of multiple products when considering their food price forecast,” he said.

“The outlook for vegetables and fruit remains optimistic. Our observations of the meat and eggs food component are also encouraging, as we see improvement in supplies and suspect prices will moderate.”

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