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 low-growth 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 low-growth 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.
Chloe Allison, an economist at the Reserve Bank, and Neryvia Pillay, a policy associate at Economic Research Southern Africa and a research fellow at the Reserve Bank, found that different grants had opposing effects on inflation, depending on the household composition, grant size and consumption patterns of the beneficiaries. “We find that an expansion in the number of social grants could increase prices. This has implications for the introduction of a basic income grant.”
The maize meal porridge index uses data from Pietermaritzburg Economic Justice & Dignity’s household food basket. The basket, jointly created with women residing in economically disadvantaged areas across several SA cities, looks at foods and quantities that women from an average low-income household consume. The index monitors fluctuations in prices of key ingredients that make up maize meal porridge from October 2020 to January 2024. The foods include maize meal (30kg), white sugar (10kg), salt (1kg), full-cream milk (6I), margarine (1kg) and peanut butter (400g x 2).
Zenith
The data shows changes in the total cost of maize meal porridge have been on a consistent upward trend from October 2020 to February 2024.
The year-on-year percentage changes in February 2024 compared with February 2023 for each individual ingredient of maize meal porridge, however, shows maize meal itself stands out as the sole ingredient experiencing a year-on-year price decrease, owing to favourable harvests and an anticipated global decrease in demand.
“Farmers’ concerns regarding the El Niño climate phenomenon have also moderated, further contributing to the decline in maize meal prices. Conversely, prices of the remaining ingredients have witnessed year-on-year increases, with peanut butter leading the surge,” Mdluli said, adding that the index reached its peak of 15.7% in February 2023.
“The maize meal porridge index lends credence to the notion that food inflation might have reached its zenith in early 2023 and is poised to gradually recede throughout the year, offering much relief to consumers especially from low-income households.”
Mdluli said load-shedding remained a key driver of food inflation as manufacturers resorted to emergency diesel-powered generators to sustain operations in the short term.
He said RCL Foods, a producer of well-known food brands including Yum Yum peanut butter, Selati sugar, and 5 Star Super Maize Meal, recorded a 33% surge in diesel consumption from 26,435kl in 2018 to 35,154kl in 2023.
He added that the price of diesel (500 ppm, inland) rose by about 73% from January 2018 to February 2024, while diesel (50 ppm, inland) increased by 68% during the same period.
“These escalating diesel costs have a cascading effect on food inflation, as retailers inevitably pass on the increased expenses to consumers,” he said.
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