Another sign South Africans aren’t coping
South Africans are buying less food because of strained household finances, and weather pressures risk food production and prices for the second half of 2024 and even 2025.
According to data from Statistics South Africa (Stats SA), sales at general retailers, which represent the retail trade of food and beverage products at non-specialised stores, declined by 2.2% in 2023 when adjusted for inflation.
However, consultancy firm PwC noted that considering population growth of an estimated 1.0% during the year, the volume of food and beverages sold per capita at grocery stores and supermarkets declined by 3.2% in 2023.
“The decrease in food and beverage sales volumes is largely due to a weakening of consumer purchasing power,” PwC said.
“Salaries and wages increased by about 5.0% last year, while consumer price inflation averaged nearly 6.0%. This suggests a one-percentage-point decrease in purchasing power following the almost 3.0-percentage-point decrease in the previous year,” it added.
Compounding the pressures on households, PwC also pointed out that families are facing challenges due to changes in spending priorities.
For example, the prime lending rate has increased by 4.75 percentage points in the current monetary policy tightening cycle, leading to home loan repayments being at least 40% higher than three years ago.
This increase in monthly debt service fees has taken money away from other essential spending categories such as food and healthcare.
“The financial strain caused by these factors, along with unemployment and poverty, led to two out of five South African adults needing to borrow money to buy food in 2023, according to data from FinMark Trust,” said PwC.
Risks
Food price inflation has decreased to the lowest level in four years following the Covid-19 pandemic.
However, there will be continued pressure on nutritional security for the rest of 2024 and heading into 2025.
PwC warned that while real income growth is expected to be marginally positive this year, pressure on food prices has increased.
Southern Africa had its driest February this year in more than four decades, with a study by World Weather Attribution finding that this was mainly caused by El Niño rather than human-caused climate change.
The prolonged drought led to a shortage of water and reduced crop yields in the region.
As the Crop Estimates Committee (CEC) reported in late March, South Africa is preparing for a significant decrease in maize production this year.
PwC explained the committee estimated that the country’s total maize production could decrease by 3.2 million tonnes (almost 20%) compared to 2023.
Specifically, the production of white maize, which is used to make maize meal products, was predicted to decrease by a quarter or around 2.2 million tonnes.
In late April, the CEC confirmed that it still expected the white maize crop to decrease by 2.1 million tonnes this year.
The Agricultural Business Chamber of SA (Agbiz) has warned that maize meal prices could increase by 10% to 12% during the second quarter of the year, on top of the 35% rise seen over the preceding 12 months.
PwC highlighted that the increase suggested by Agbiz for the second quarter of 2024 would take the price of a 30kg bag of maize meal from R294 in April to R330 by June.
To understand the impact on the cost of living, it calculated the ratio between the price for this 30kg bag and the national minimum wage (NMW).
With the annual upward adjustment of the NMW to R27.58 per hour in March, the bag of staple food costs the equivalent of 6.0% of the monthly minimum income (R4,854.08 based on 22 work days).
This was the lowest ratio in two years. However, by June this year, the measure could increase again to 6.7%.
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