Cheaper food will boost savings
• If grocery prices are lowered, consumers will be able to save more and spend in other sectors
The global political economy has been subject to a number of rare and extreme crises over the past three years, severely affecting consumer goods and prices throughout the world. The global outbreak of Covid-19 and Russia’s invasion of Ukraine have sent shock waves through every economy, forcing citizens to tighten their budgets as food costs and fuel prices rose.
South Africans were not shielded from this onslaught, and in March 2022 reports indicated that people were paying over 10% more for basic food items compared to March 2021. Data indicates that consumers continue to be hard hit by a number of factors that have increased the cost of living in our country, with basket sizes across SA decreasing in size by almost 24% year on year.
FOOD BASKETS
This has been particularly evident in a few cities where basket sizes have decreased considerably, namely East London, Bloemfontein and Soweto. Basket sizes among younger shoppers (anyone younger than 35) are also considerably smaller than those of more senior age categories.
Basket sizes help us make reference to the average amount spent per consumer basket in SA. When we look at basket size trends over an extended period, we are able to understand consumers better by evaluating and monitoring how their money is spent and on which items. This is critically important in a country such as SA, which now has the highest unemployment rate in the world.
With rolling blackouts affecting businesses countrywide and fuel prices rising earlier in April, , it’s no wonder we are seeing a 24% decrease in basket sizes from the average SA consumer. To make matters worse, the price of electricity also increased by 18.6% from April 1.
Several increases to operational input costs have resulted in price hikes across production processes, labour, transport and materials for food producers and retailers. The inflationary pressure on consumers continues to rise, in line with rising input costs. Unfortunately, not all income groups are affected by inflation in the same manner. If immediate action is not taken, lower-income households will have to endure a further drop in their standard of living.
The government and food manufacturers can work together to address the effect a number of socioeconomic indicators have had on the purchasing power of SA consumers. If the government could offer suppliers more effective tax breaks or rebates on certain fuel levies, producers would be empowered with the margins they need to find new ways to reduce the effects of inflation on the produce they sell to retailers.
This could be achieved by decreasing food prices in line with the government subsidy, or by navigating rewards systems effectively to encourage increasing basket sizes in a manner that doesn’t hurt the consumer.
If we want to ensure that our youth and elderly are receiving the nutrition they need, the government must encourage local grocery stores to lower the prices of a number of food items, to help insulate consumers from the effects of rising poverty, joblessness and load-shedding in our country.
If food producers and retailers were empowered to lower the prices of 10 staple foods (preferably including maize meal and eggs), it would benefit consumers and the economy. By working together, a simple 20% decrease across a number of new food categories would help make certain staples more accessible to citizens in lower-income households.
The long-term solution would have to include a concerted shift to a national food and agricultural policy that is designed to make nutritious foods more affordable in our country. The UN Food & Agriculture Organisation (FAO) argues that government subsidies work best if they help consumers buy more food.
If the SA government can motivate or constructively work with food producers and retailers towards this goal, consumers (especially those from lower-income households) could experience relief sooner rather than later.
This would yield several positive outcomes for our people and country. Children who are well-fed focus better in school, thereby improving our national educational outcomes.
If we can ensure our youth’s capacity to study well and study further, with the nutrition they need, we can sustainably secure the long-term skills development of our human capital.
By lowering the prices of certain food staples, we are also able to encourage two new sets of behaviours among consumers: saving and spending the surplus as needed. If consumers are not constrained by their basket sizes at our grocery stores, they have the option to save more every month — as well as spend more in other sectors of our
IF WE CAN ENSURE OUR YOUTH’S CAPACITY TO STUDY WELL AND FURTHER, WITH THE NUTRITION THEY NEED, WE CAN SECURE LONG-TERM SKILLS DEVELOPMENT
economy. Both are critically important to help stimulate the economy, support local businesses and facilitate sustainable job creation.
A concerted effort, spearheaded by a public-private partnership between government, food producers and retailers, will remain a critical undertaking to shield the most vulnerable members of our economy from the impact of rising input costs affecting our collective standard of living.
The core tenet of ubuntu — “I am because we are ”— must underpin all negotiations. This mindset and ideology could contribute immensely to the establishment of a measured and sustainable approach to improving basket sizes — and the overall economic outlook — over the next year.