Food inflation has dire effect on poor

Low-income households have experienced a noteworthy surge in underspending on essential food items since October 2020. They have been forced to resort to cheaper alternatives, which often consist of processed and unhealthy food choices, as food prices surge.

This trend is captured in a new study, the maize meal porridge index, developed by the Centre for Risk Analysis to determine the effect of food inflation on low-income households. Centre for Risk Analysis senior economist Mlondi Mdluli said there had been a consistent upward trend in the total cost of maize meal porridge since October 2020.

“An increase from R549.24 to R729.90, or by 32.9%” for 50kg of maize meal. “Notably, this escalation outpaces the growth rate of the minimum wage, which has risen by 22.5% from R20.67 per hour to R25.42 per hour over the same period,” Mdluli said.

The study underscores the challenge posed by rising food costs compared with the relatively slower growth in wages, highlighting potential concerns about affordability, especially for low-income households.

According to Stats SA, headline inflation rose to 5.3% year on year in January from 5.1% in December 2023. Food and nonalcoholic beverages were the main drivers of inflation, increasing by 7.2% year on year. Inflation can substantially diminish the purchasing power of wages, especially in lowgrowth environments. SA’s economy grew by an average of less than 0.4% a year from 2020 to 2023 and growth is anticipated to reach 1.3% in 2024.

“In addition to inflationary pressures, businesses encounter challenges in augmenting their revenues and profits in a lowgrowth scenario,” Mdluli said. “Consequently, they may exhibit reluctance to increase wages for their workforce, leading to stagnation or sluggish growth in wages, as many employers find themselves less able or willing to offer raises or bonuses.”

A study published by the SA Reserve Bank found that cash transfers to low-income households have had significant price effects on the poor, especially on food and housing.