Photo by: Creamer Media's Marleny Arnoldi
In May, for the third month in a row, South African food and non-alcoholic beverage (NAB) inflation, hereafter to be referred to simply as food inflation, ran at a level below that of consumer price index (CPI) headline inflation, reported the Bureau for Food and Agricultural Policy (BFAP) in its latest Food Inflation Brief report. Year-on-year (y-o-y) food inflation was 4.7% last month, while CPI headline inflation was 5.2%. In month-on-month (m-o-m) terms, the two rates were effectively flat, with each increasing by only 0.2%. Food inflation contributed 0.9 percentage points (ppt) to the CPI headline inflation y-o-y figure, and 0.03 ppt to the m-o-m number.
Regarding input costs for the food sector, in May the CPI for “electricity and other fuels” rose by 15.3%, y-o-y, but by zero percent, m-o-m. The CPI figure for “fuel” increased by 9%, y-o-y, and by 1.9%, m-o-m. But, for the first time in many months, the rand appreciated against the dollar, instead of depreciating. In y-o-y terms, the rand appreciated by 3.4%, from R19.07:$1.00 in May 2023 to R18.42:$1.00; in m-o-m terms, the appreciation was 2.4%, from R18.88:$1.00 in April, to R18.42:$1.00 in May.
“Exchange rate depreciation for much of 2023 was a critical contributor to sustained high food inflation, but the value of the rand strengthened substantially in June this year,” pointed out the BFAP. “This follows improved sentiments following the election result, which ushered in the first coalition government in South Africa since the dawn of democracy. Markets responded positively to the formation of the Government of National Unity and while key factors such as cabinet positions are yet to be finalised, a stable partnership in this regard could result in further exchange rate appreciation, which would in turn reduce inflation further.”
The BFAP’s list of infrastructure challenges facing the sector again omitted any reference to loadshedding, of which there has been none for three months now. But it now listed, instead, municipal services challenges, port challenges, and water infrastructure.
The food categories which experienced the highest y-o-y inflation in May were – sugar and sugar-rich foods (15.5%), NAB (7.8%), vegetables (7.6%), dairy and eggs (7.5%), fruit (6%), fish (4.8%), bread and cereals (3.9%) and meat (0.7%). Oils and fats saw y-o-y depreciation of -2.3%. In m-o-m terms, the ranking was – sugar and sugar-rich foods (1.1%), NAB (0.9%), fish (0.8%), bread and cereals (also 0.8%), dairy and eggs (0.4%), oils and fats (again, 0.4%) and vegetables (0.3%). Meat experienced m-o-m deflation of -0.2%, while the deflation for fruit was -6.6%.
The report listed those commonly bought food items which saw high y-o-y inflation rates in May (the order and categorisation was that of the BFAP). Those with inflation equal to or greater than 30% were papaya; and, Ceylon/black tea and instant coffee. Those with inflation equal to or greater than 20%, but less than 30%, were rice, potatoes, frozen potato chips; oranges; white sugar, brown sugar; and, condensed milk. Those with inflation equal to or greater than 10%, but less than 20%, were frozen chicken portions, eggs; fish fingers, hake; powdered milk, whiteners; tomatoes, apples; peanut butter, dried beans, peanuts; and, fruit juice and rooibos tea.
Those commonly bought food items which experienced y-o-y deflation in May were (again as the BFAP listed them) maize meal, white bread, pasta, cereals/porridge; beef (chuck, T-bone, mince, fillet, rump, sirloin); pork (chops, bacon); mutton/lamb (leg, rib chops, stew); whole fresh chicken; sour milk, prepared custard, cheese, fresh cream; carrots, onions, sweet peppers, spinach, pumpkin, beetroot, canned mixed vegetables; bananas, pineapple; sunflower and canola oil; and, sugar-rich foods.
In May, the cost of the BFAP’s thrifty healthy food basket (THFB) increased by R366, or 4.5%, y-o-y, and by R40, or 1.1%, m-o-m. The THFB is composed of 26 nutritionally-balanced food items, from all the food groups, and is designed to feed a reference family of two adults, one older and one younger child, for a month. Buying the THFB in May would have cost a low-income family 31.1% of its income, which represented a deterioration over April, when the THFB would have cost them 30.7% of their income.