While the announcement by the Department of Mineral Resources and Energy of another – albeit small - cut in the petrol price will bring some relief to motorists at the pumps this month, the latest Household Affordability Index paints a grim picture for the millions of South Africans who are battling to feed their families.
CEO of Debt Rescue Neil Roets, who has frequently spoken out about the consequences of food inflation over the past year, says the resulting misery it brings is by far the most critical issue in the country right now.
“The petrol price cut will make no real difference to the lives of most citizens who have had to absorb massive fuel price hikes over the past year,” he asserts. “The only thing that will make a difference is a concerted effort by the major food retailers to bring down the price of basic foodstuffs so that South Africans can eat three decent meals a day. It is unthinkable that almost 20 million people in the country go to bed hungry every night, and of these, seven million people suffer from chronic hunger.”
“For the past three months, fuel prices and global food commodity prices have come down, yet, we do not see a corresponding drop in food prices at the retail level,” says Mervyn Abrahams of Pietermaritzburg Economic Justice & Dignity Group (PMBEJD), creators of the Household Affordability Index.
“Due to a lack of transparency in the local food value chains, we are unable to identify where in the chain inflation remains stubbornly high. The question remains whether the industry is passing on the lower costs to the consumer or not,” he says.
According to the September index, it costs nearly 14% more to feed a family compared to last year in the same month. September saw higher prices (5% or more) on white bread, onions, boerewors, tomatoes, butternut, oranges and stock cubes. Foods which increased by 3% include brown bread, potatoes, milk and curry powder. Frozen chicken portions and beef increased by yet another 2%. These items are all among the basic staple foods needed to serve the nation’s children at least one nutritious meal per day at the dinner table.
“What is most significant is that the average cost to feed a child a basic nutritious diet increased by R8.37 or 1.0% in September – at a time when 81% of South Africans are cutting down on daily meals because they can no longer afford three square meals per day,” Roets points out.
“Even the thought that the increase in staple foods may be due to price gouging by our own retailers – those businesses that profit the most from the increases – is too horrifying to even contemplate,” says Roets.
In September, the Reserve Bank, once again, increased the repo rate, this time by 75 basis points, arguing that it would bring down food inflation.
Abrahams argues that if retailers are not passing on lower costs, then raising interest rates will simply bring more pain to the South African consumer —potentially increasing unemployment and further contracting the economy — without addressing the problem of lowering food price inflation.
He believes that, instead of raising interest rates, an assessment should be made to identify where in the value chains food inflation remains stubborn, and deal with this through an appropriate intervention, if and where such high inflation is not justified.
Roets points out that, although the petrol price cut of R1.02 a litre for 95 octane petrol and 89 cents for 93 octane is good news, the price of diesel has risen by between 10 and 15 cents per litre because of a squeeze on diesel supplies worldwide.
He says that the price of diesel directly impacts the transportation and the costs of manufacturing goods, and that these costs are invariably passed on to the people who buy the goods.
This results in inflationary pressure, which indirectly affects consumers, as everyone along the supply chain is forced to hike their prices.
“It’s always the most vulnerable who are hardest hit, and lower-income families are the ones who suffer most,” he emphasises.
South Africans are increasingly relying on their credit and store cards to put food on the table, leading to a debt trap they cannot easily get out of.
“My advice to those who fall into this trap is to seek help from a registered debt counsellor who can assist them to manage their financial predicament. This has been a very successful solution for thousands of consumers who are plagued by over-indebtedness,” he concludes.
BUSINESS REPORT