Cutting back on meat and veggies

Consumers struggling to make ends meet are getting into debt to buy groceries and cutting back on essential foods like meat and vegetables, as rising double-digit food price inflation due to drought and higher energy costs bites deep into household budgets.

And the high price of food inflation has led consumer groups to raise concerns about growing food insecurity, calling on the government to take action to help farmers and consumers, as households borrow to buy food and cut back on nutritious foods for cheaper processed products like powdered milk and soups to make high-starch diets palatable.

With the latest fuel price hike of 43 cents for 95 octane petrol and 23 cents for diesel on October 5, food prices are set to rise further, and although some retailers say they are discounting basic food items, consumer activists believe some profit margins in the food value chain remain high.

According to Statistics South Africa, the Consumer Price Index (CPI), the rate at which goods and services increase in price, was 5.9 % and food and non-alcoholic beverage price inflation was 11.3 % in August.

The latest National Agricultural Marketing Council food basket report recorded double-digit food price increases (see sidebar) for many items in the same month, including margarine (13.49%), sunflower oil (23.42%); apples (13.77%); bananas (18.99%); oranges (51.15%); brown bread (13.39%); white bread (11.73%); mealie meal super (40.18%), onions (64.24%) and potatoes (31.25%).

But stores where poor consumers shop reflect higher food price inflation according to the Pietermaritzburg Agency for Community Social Action (Pacsa), which highlights the plight of local lower LSM households, those hardest hit by escalating food prices.

In its latest Monthly Food Price Barometer, Pacsa recorded double-digit food price inflation at stores servicing lower LSMs for many items in August (see sidebar), including mealie meal (39%); rice 29%; samp (46%), white sugar (26%); sugar beans (34%); cooking oil (27%), fresh milk (12%); eggs (19%), beef (13%), polony (25%), carrots (34%); onions (146%) and potatoes (106%).

Pacsa reported consumers were cutting back on milk, eggs, meat and fresh produce in favour of milk powders, Cremora and powdered soups.

FNB agricultural economist Paul Makube said the drought continued to drive wheat, maize and meat price hikes, while strong demand for meat exports to the Middle East and Africa for the tourism sector was another factor. He said the petrol price increase would filter down to food prices next month, with inflation peaking in the first quarter of 2017.

“It’s belt-tightening until the second quarter of 2017, when we expect to see increased availability and a moderation in food prices. But that’s largely dependent on the weather.

“Forecasts have been changing rapidly in the past few months. Earlier, we were expecting a strong La Niña, which comes with heavy rainfall, the opposite of El Niña.

“But the outlook has changed and we are talking about neutral conditions and normal rainfall. But when it comes is the issue, because we are now entering planting season for summer crops. We haven’t seen sufficient rains so far and that’s a worry,” he said.

Makube said the government needed to accelerate its insurance cover assistance for farmers, to keep commercial and small-scale growers in production.

“There are discussions around that already, and we are looking forward to having a situation at some stage where it can be addressed, because we are facing long-term climate change,” he said.

Imraahn Ismail-Mukaddam, Consumer Action Network director and national co-ordinating committee member of the SA Food Sovereignty Campaign, alleged that some manufacturers were inflating prices to hedge against predicted shortages due to the drought.

“This artificial inflating of prices in anticipation of cost increases down the line is placing consumers in a precarious predicament, as manufacturers are building up cash reserves at their expense.

“The argument for hedging to absorb cost pressure in future is not always valid, as we saw recently with the tariff increases on imported wheat, because international wheat prices had in fact dropped, making imported wheat cheaper than locally-produced wheat,” Mukaddam said.

“We believe food prices are being driven by excessive profit-taking more than actual input costs, as can be seen from the annual financial reports of most of the major food producers,” he said.

Mukaddam said the government should intervene to assist the country’s roughly 14.4 million food insecure citizens, because a R10 monthly increase for social grant recipients proposed in the mid-term budget was meagre.

“We will have to insist on a much more holistic approach, as opposed to using production and supply as a means of measuring food security.

“Supermarkets are filled to the rafters with food, but to a huge section of the population food has become unaffordable,” he said.

SA National Consumer Union chairwoman Ina Wilken said: “The elephant in the room is high electricity prices and the high increases of all municipal commodities – water, sanitation and tax on properties.

“These increases should not be under-estimated and have a huge effect on public and private enterprises. It leaves less money in consumers’ pockets to spend on basic necessities,” she said.

“Consumers are finding it extremely difficult to survive, to put the most basics on the table. The latest release from the National Credit Regulator indicates that unsecured credit increased by R1.73 billion (9.14%) quarter-on-quarter and by R3.16 billion (18.10%) yearon-year for the quarter ending June 2016.

“This is an indication that in order to survive, many consumers have no option but to apply for credit to put basics on the table,” she said.

Wilken said consumers had done their utmost to fight inflation.

“We have budgeted. We use much less electricity. We try to drive less to save fuel. We have done all we could. Is it not time that government starts looking at the ever-increasing prices of electricity and fuel, and stops blaming the ever-decreasing value of the rand to the dollar?”

Wilken said the government should provide more assistance to drought-stricken farmers to prevent food shortages.

Sheryl Hendriks, the agricultural economist and food security expert and director of the Institute for Food, Nutrition and Well-being at the University of Pretoria, said excessive profiteering was not taking place in her view, as manufacturers and retailers impacted by rising electricity and transport costs and global market volatility had to adopt risk management strategies.

“They don’t know what the economy and prices are going to do in future, so they have to balance the books somehow, and it is just sound business practice – which is also to protect their employees. These companies are dealing with very difficult things, some of those industries are really suffering,” she said.

A spokeswoman for the Shoprite Group said the retailer constantly sought ways to keep prices low and had subsidised basic food products to the value of R32 million over the past year.

“The group started doing basic food subsidies three years ago, dropping the prices of selected basic foodstuffs such as bread, oil and maize meal as close as possible to cost price, and sometimes below, for extended periods,” she said.

“During the 2016 financial year, the group maintained internal food inflation at a rate of 3.5% compared to Stats SA’s figure of 7.2%.”

Pick n Pay group executive strategy and communication, David North, said the retailer consistently kept food price increases “well below general food inflation”.

“We achieve this by becoming more efficient and reducing our costs, working with suppliers to restrict price increases only when they are fully justified, and operating a strong and relevant promotional calendar,” North said.