Consumers are battling high food and fuel prices, as well as a higher repo rate with the same salaries they earned last year. Add to that the high price of electricity, the cost of alternative energy for load shedding, higher transport costs and you have the perfect storm to destroy what is left of consumer finances in South Africa.
The department of mineral resources and energy announced the fuel price increase on Monday when consumers were still reeling from the news of a new Covid variant with unknown effects on the economy.
Petrol increased by 81 cents per litre, diesel by 72.50 and 74.50 cents per litre and illuminating paraffin by R1.45 per litre. Our petrol price of R20.35 per litre for 95 in Gauteng does not compare favourably to our neighbours, Namibia, where a litre sells for R14.97 and Botswana, where you will pay R14.94, according to website globalpetrolprices.com.
With an average global petrol price of R19.43 per litre, you will pay R15.73 for a litre in the US, R31.31 in the UK and R19.03 in Australia. All countries pay the same for Brent crude oil, but fuel prices differ due to levies in the different countries.
As always, the poor consumers will suffer the most and money will have to be taken from the food budget to pay more for transport and other increases.
According to the Pietermaritzburg Economic Justice and Dignity (PMEJD) group, the continuing run-through of higher electricity prices in the long value chains, the cost of alternative electricity supplies, higher transport cost due to fuel prices and the weakening rand all drive food prices upwards. The increase in the repo rate will also put pressure on debt servicing and drive prices up even more.
The Household Affordability Index
Key data from the PEJD’s November Household Affordability Index, which tracks food price data from 44 supermarkets and 30 butcheries, shows that the average cost of the Household Food Basket was R4,272.44 in November, R45.11 less than the R4,317.56 consumers paid in October.
However, it cost R254.19 more than in November last year, when it cost R4,018.25. Since the start of the Household Affordability Index in September 2020, the average cost of the food basket increased by R416.10 (10,8%), from R3, 856.34 in September 2020 to R4,272.44 in November 2021.
In November 2021, all household food baskets, except for Johannesburg, decreased. The basket for Johannesburg was above the average at R4,333.12 due to higher prices for vegetables, cooking oil and bread. The declines for all other baskets were off very high spikes in October, mostly driven by seasonal changes in vegetable prices and the delayed run through of the electricity price increase.
The group noted that the decline in prices for November are inconsistent with past trends, although the decreases were less than the spikes a month earlier. Food prices are extremely volatile at the moment.
“Although the festive season always ushers in higher prices and unbelievable savings, the women in poor communities who do the price checking say the festive season prices are a bit of a swindle and sometimes you get lucky, but most of the time you pay more.”
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Growing gap between available money and cost of food basket for consumers
The group has been raising concern over the past few months about the growing gap between the value of money in consumers’ pockets and the cost of a basic, but nutritious and diverse basket of food. High food and fuel prices are making life increasingly difficult.
“We have seen that the affordability thresholds of households to secure their very core survivalist needs of transport, electricity, food, domestic and personal hygiene products, educational expenses, school clothes, books and socks, warm blankets and safe homes have long ago been breached.
“There comes a time when the gap between the financial resources families can gather and the costs of goods and services become so large that even moderate to substantial decreases in the cost of food, among other critical expenses, really makes very little difference in the lives of millions of South African households because the gap is too big.”
The group says efforts to secure food for the family table, keep the lights on, pay for taxi fare, keep kids in school, clothe and keep children safe just keeps getting increasingly impossible, resulting in people not eating properly because they simply are unable to afford it due to high food and fuel prices.
“Millions of South African consumers cannot afford food. Does it really matter, for example, if our data shows a 2.3% or R98.17 month-on-month increase or decrease on the household food basket, when a household food basket costs so much more than what the majority of South Africans can afford?
“When has food far exceeded the household affordability thresholds of millions of households by exponential multiples even three or five years ago? We have a massive food, nutrition, health and well-being crisis, which is impacting and threatening all our educational, economic, societal, political and desperately needed transformational outcomes.”
National Minimum Wage under poverty line
The National Minimum Wage (NMW) for a general worker in November 2021 is R3,643.92. The group calculated that transport to work and back costs an average of R1,344 (36.9% of NMW) due to high fuel prices, and electricity an average of R731.50 (20.1% of NMW).
Transport and electricity, both non-negotiable expenses, take up 57% (R2,075.50) of the NMW, leaving R1,568.42 to secure all other household expenses. With the average cost of the food basket for a family of four now at R2,921.36 families will still have a food shortfall of 46.3% (-R1,352.94) even if all the remaining money after transport and electricity went to food.
When the MMW of R3,643.92 is disbursed in a black South African family of 4.3 people, each person gets R847.42, which is well below the upper-bound poverty line of R1,335 per person per month. The minimum shortfall on food for a family is 46.3% in November 2021.
“Government can describe Covid-19 as the most devastating crisis our country has faced for a very long time and yet it is not able or willing to courageously steer us forward out of the crisis. Key to moving forward is to accept where we are. Accept the dire reality we face and then intervene wisely, justly, confidently, decisively,” the group says.