South Africans currently face multiple difficulties, with food prices making matters significantly worse. Some experts point to significant decreases in food costs in the months ahead, but whether these price cuts will reach retail shelves, remains a mystery for now.
After months of price increases in electricity, fuel, and many consumer goods, South African consumers might finally catch a break.
According to agricultural economist Dr Johnny van der Merwe, most agricultural commodity prices can actually decrease over the coming months.
Prices decreases throughout
“Most agricultural commodity prices are decreasing at the moment with significant decreases seen in international grain prices, meat prices, and some vegetables and fruits that will also likely trade on a lower level compared to last year,” Van der Merwe told Food For Mzansi.
More specifically, he expects prices for beef, sheep, maize, onions, avocados, oranges, and nuts to be significantly lower compared to the past two years.
As it stands, average beef and chicken prices have already slightly decreased, according to the Pietermaritzburg Economic Justice and Dignity Group.
Their household affordability index study for February 2023 shows that a 2kg packet of beef meat costs R12.88 less than it did in January 2023. Furthermore, a 10kg pack of frozen chicken portion costs R5.05 less in February 2023 than what it did a month ago.
Meanwhile, Van der Merwe added that higher production and lower expected demand (locally and abroad) will likely keep these prices at lower levels.
“So from a primary production point of view, it can put a lot of pressure on profitability, especially with input costs that remain on higher levels for now,” he said.
Will it filter through to retail?
Van der Merwe said he is not quite sure whether these lower prices will be seen at a retail level.
“Lower demand from all types of consumers will ultimately force prices down as there is less product sold at the retail level. However, this usually takes longer than the decrease in producer prices,” he said.
“Furthermore, we also need to take into consideration the effect of the weaker exchange rate and load shedding,” he pointed out.
Usually, these two factors increase the cost and risk to get the product from the farm gate to the end consumer.
“I, therefore, question whether we will see the full benefit of lower commodity prices at the retail level. With the weaker exchange rate we will actually also see imported product prices increasing, putting further pressure on inflation and the pockets of consumers,” Van der Merwe said.
Government’s handling of VAT ‘disappointing’
According to FairPlay founder Francois Baird, while consumers suffer, it is “hugely disappointing” that the government fails to take steps such as removing the 15% value-added tax (VAT) from chicken portions, which are a staple diet for the poor.
“VAT-free chicken is a pro-poor proposal and it would bring immediate relief to lower-income households who are always hardest hit by food price rises,” Baird said.
“The option is there, but the government shows no interest in helping the poor in this way. They could lessen the revenue loss by implementing the anti-dumping duties on Brazil and other countries that were unnecessarily suspended last year.”
In the meantime, experts say the full impact of Eskom’s load shedding had not yet fully worked its way into food prices.
And according to FairPlay, that means that South Africa’s cash-strapped consumers will continue to pay higher prices for food this year and that poor people will be hardest hit. They have once again, called on the government to implement VAT-free chicken, as it would help the poor who face increasing hardships this year.
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