Businesses fatten the price curve, while consumers struggle

Hit by a high unemployment rate, a stagnant economy and the impact of the deadly Covid-19 pandemic, South African consumers are battling to keep up with a spike in food prices.

The financial impact of Covid-19 is set to have a long-term negative effect on consumers – likely to remain for many months to come, according to the latest online survey on 850 South Africans, conducted by a research company Consulta.

Due to the financial squeeze, 60% of those surveyed expected to spend less on food cooked away from home “which gives an indication that take-out and full-service restaurants are likely to feel more pain, even when the lockdown is lifted on dining out”.

The survey also predicted consumers would cut down spending on clothing, travel, fuel, hobbies, alcoholic beverages, entertainment, footwear, gym membership, health and beauty products.

“These are challenging times and there is an overwhelming high sense of uncertainty among South Africans on what the future holds.

“However, a strong theme that has continued from the first lockdown survey conducted by Consulta during April, is that South Africans remain resilient and are trying hard to adapt to the circumstances.

“There is concern about the negative impact on vulnerable communities,” said Charlene van Niekerk, project director at Consulta.

Regarding concerns that some retailers have exploited Covid-19 by increasing food prices, National Consumer Commission spokesperson Phetho Ntaba said the body was investigating 127 matters, of which 49 have been settled.

“We have reached a settlement with two suppliers, which were fined,” said Ntaba, adding: “Consumers have a right to fair, just and reasonable prices.

“We have found that in most cases, price hikes were due to high demand for goods and services, with some suppliers exploiting scarcity.

“When we receive a complaint into allegations of price gouging, we conduct an investigation to determine the reasons for price increases.

“We are also investigating allegations into price gouging of medical, hygiene and emergency products,” said Ntaba.

According to leading economist Mike Schussler, consumers and retailers were “feeling the impact of cost push factors: a weaker rand, increase in electricity price and transportation of imported goods”.

He explained: “Some food prices have gone up drastically, coming as a shock to consumers, while the fuel price has helped by going down. But it is important to understand the entire value chain on why we are in this situation.

“I think retailers are struggling because they can’t sell their full range of products and now have to make up for that somewhere.

“This is due to a weaker rand and an increase in electricity prices – a major problem in South Africa at the moment. Faced with steep electricity prices, retailers still have to pay full rent and staff.

“We have had stories of 10km queues at border posts by truck drivers – all with an impact on supply chain,” Schussler said. “Some chocolate supplies ran out in parts of the country, because when you import chocolate and cocoa, transport costs run higher and it takes you a lot longer to get the product to retailers.

“If you are a chicken producer, you can only sell to the supermarket, with very little going to Nando’s, Kentucky Fried Chicken and Chicken Licken.

“Another factor is the maize price, which has gone up. The maize price goes into many things, not only maize meal. About 60% of the price of chicken is maize.”

Schussler said food price increases represented “a mixed bag”.

“While I have noticed that meat, cheese, milk and some prepared foodstuffs have gone up a lot more than we expected, there have been some specials on vegetables, which represents a bit of a counterbalance.

“These prices can also be attributed to the volumes which are not there. The manufacturing sector is also not opened fully.

“If things are not opened fully and functioning fully, businesses have to make up somewhere to stay afloat.”

Groceries cost 25% more

Festival Mall shoppers Louis Steenkamp and Pinky Mabaso may live miles away from each other – one in Kempton Park and the other in Tembisa – but when it comes to the effect of steep food prices, their pain is the same.

Pinky Mabaso. Picture: Brian Sokutu

Not only do they share the financial pinch, their spending food patterns are exactly the same: Steenkamp and Mabaso would spend R4,000 per month on groceries before the advent of the coronavirus. They now spend R5,000.

The two were among several consumers interviewed by Saturday Citizen on Friday on the impact of food prices during the pandemic.

Steenkamp said: “The increase in food prices during Covid-19 comes across as totally abnormal because more people are not working. Bread, milk and meat have gone up.

“I find myself not working a full month compared to before and now I have to cut back, which is difficult.”

Mabaso said: “Food has gone up … and we have to see how to survive through this pandemic.”

Jenny Bekwa said job losses, medical costs, transport and food were her family’s biggest headaches.

– brians@citizen.co.za

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