From the ed­i­tor

Finweek English Edition - - CONTENTS - JANA MARAIS

few of us who have shopped for food re­cently would be sur­prised at the lat­est in­fla­tion data, which showed food prices in­creased sharply by 9.8% year-on-year (y/y) in March – if any­thing, the num­ber seems too low. At one su­per­mar­ket in ru­ral East­ern Cape, for ex­am­ple, the re­tail price for 25kg of spe­cial maize meal has jumped from R119.50 three months ago to R177 – an in­crease of nearly 50%. Higher-qual­ity su­per maize meal now re­tails at R240 for 25kg. Keep­ing in mind that 53% of South Africans over the age of 15 live on less than R1 399 a month, ac­cord­ing to the 2014 Liv­ing Stan­dards Mea­sures (LSM), maize meal must be get­ting un­af­ford­able for an in­creas­ing num­ber of South Africans who rely on it as their sta­ple food.

Aca­demics Saliem Fakir and Nan Tian re­cently ex­plained in an ar­ti­cle pub­lished by Daily Mav­er­ick that the poor­est decile group is spend­ing be­tween five and nine times more of their to­tal ex­pen­di­ture on food than the rich­est group, and al­most three times more than the na­tional av­er­age. Food price in­creases there­fore af­fect the poor­est in­come group sub­stan­tially more than the av­er­age or rich­est group.

There is also a dif­fer­ence in food prices for the ur­ban and ru­ral poor, as food prices are higher in ru­ral ar­eas, the two aca­demics pointed out. The over­all consumer in­fla­tion num­bers for March show the high­est year-onyear price in­creases were seen in Lim­popo and the East­ern Cape, two of the country’s poor­est prov­inces.

Kevin Lings, chief econ­o­mist at Stan­lib, warns that food in­fla­tion will con­tinue to in­crease over the com­ing months, re­flect­ing partly the im­pact of the weaker rand (com­pared with its 2015 lev­els), and the cur­rent drought. Stan­lib ex­pects food in­fla­tion to end 2016 at around 14% y/y, which will help push over­all consumer in­fla­tion up to around 8% by year-end.

Fakir and Tian rec­om­mend tar­geted govern­ment in­ter­ven­tions to re­lieve the ef­fects of food in­fla­tion on the poor. So­cial grants help, but they won’t solve the prob­lem in the long term. That would re­quire ad­dress­ing mar­ket fail­ure in ru­ral ar­eas, where there is of­ten limited com­pe­ti­tion in the re­tail sec­tor, and fix­ing land re­form, though ac­cess to land and wa­ter alone do not a farmer make, they say.

So for the fore­see­able fu­ture, South African house­holds will spend an in­creas­ing share of their in­come to buy the same vol­ume of food – and those are the lucky ones.

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