South Africans are contending with a rapidly unfolding food crisis, marked by rising transport and food prices. As they do so, high levels of unemployment, unchecked inequality and deepening poverty continue under the watch of the South African State, threatening the right to food of the most vulnerable in our society. According to StatsSA, annual consumer inflation reached 7.8% in July 2022, the highest reading since May 2009 (8%), during the global financial crisis. Meanwhile, the supermarket and agribusiness giants that run South Africa’s agro-food systems are reporting increased sales and growth, in the middle of a global food crisis. Africa’s largest food retailer, Shoprite, reported a double-digit growth in sales at 10%, while agribusiness giant, Astral food, reported a 26% growth in total revenue between October 2021 and March 2022.

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This article takes stock of the drivers of food price increases, which take place in the context of relatively limited oversight and regulation of food prices in South Africa. It also looks at its impacts on ordinary South Africans and make suggestions what the state should do to remedy the situation.

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Causes of food inflation

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A research brief by the Bureau for Food and Agricultural Policy (BFAP) reported that year-on-year food inflation change hit 9.7% in July 2022, compared to 6.7% year-on-year change in the July 2021. The picture is much bleaker for low-income households.  The Pietermaritzburg Economic Justice & Dignity Group (PMBEJD) takes a closer look at what the increasing consumer price inflation means for low-income and vulnerable households across some of South Africa’s major metros. It reported a 14.2% year-on-year change of food prices, amounting to an increase of R322.55 in the food basket of low-income households in July 2022 compared to the previous year. Among the 44 essential food items tracked in the flagship Household Affordability Index, the PMBEJD recorded year-on-year price change of 19% for maize meal, 19% for brown bread and 64% for cooking oil.

Indeed while the increased price of cooking oil in South Africa, as reported in countries in the European Union like Germany, has been widely attributed to the Russia-Ukraine conflict, it is unclear if this argument holds for broader food price increases. South Africa imports about 38.5% of its total oilseed consumption and the impact from the protracted Russia-Ukraine conflict on increasing oil prices is evident. However, it is important to take a cautionary approach to avoid misattributing the causes of the food price increases we are witnessing to the war in Ukraine. Critically analysing the import exposure for particular commodities is important for attempting to disentangle the myriad underlying factors that influence food retail prices.
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The Competition Commission highlights that the level of imports relative to consumption is actually rather low for a large proportion of the essential foods in our food baskets such as fresh vegetables, fruit and milk that are largely produced and distributed locally. Nonetheless, food price hikes have not been limited to high import commodities such as chicken, wheat and sunflower oil only.

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Figure 1: Exposure to trade for essential foods

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Are high food production costs being passed down to consumers?

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When we shift our attention to fuel prices, we see that higher fuel prices increase consumer inflation. As depicted in figure 2 below, consumer inflation tends to move in the direction of fuel price hikes because trade and industry are particularly vulnerable to energy shocks, which are passed through into the retail costs of goods and services.  Therefore, recent food price hikes come as no surprise amid skyrocketing fuel prices, which were already on the rise before the war in Ukraine.

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Figure 2: Headline consumer price inflation and the Consumer Price Index (CPI) excluding Fuel (January 2010-Septmeber 2022)

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Furthermore, other factors, such as seasonality can also play a role in food pricing patterns. However, the Competition Commission argues that disparities between farm-gate prices and retail prices raise questions about pricing in commodity chains and they are affected to some extent by the anticipation of price hikes among food retailers. Given the high levels of concentration in South Africa’s agro-food systems, with five big supermarket chains dominating the food retail space, price increases driven by oligopoly power have been raised by the Competition Commission in its 2019 Grocery Retail Market Inquiry report. This proposition is supported by a multitude of empirical studies globally, showing a significant correlation between food prices and food retail concentration. In other words, greater concentration in a given market, in this case food retail, correlates with higher industry prices and profitability.

According to the National Agricultural Marketing Council (NAMC), the retailer margins for super maize meal increased by 3.69% between April 2021 and April 2022, while the farm value share (farm-gate price) decreased by 1.48% in the same period. This could very well be because of massive increases in petrol and diesel prices from 2021. However, data on where the value is actually captured is slightly more challenging to access. The data available lumps together the contributions of food manufacturing, distribution, wholesale, and retail firms.

While the food industry narrative of “economies of scale” has been widely used and accepted as an explanation for supermarket dominance in global food systems, there is a story beyond procurement and sales volumes. Highly processed and intensively addictive cheap food combined with crafty and unchecked marketing to create armies of loyal customers play an even bigger role in maintaining the profitability of supermarkets versus smaller food retailers. This has resulted in food systems that Lisa Jack, the author of, The secrets of supermarketing: A model balanced on a knife-edge, describes as “characterised by over-purchasing, over-eating, over-production and waste.” Therefore, poor regulation of food pricing and quality has resulted in a powerful food industry that sets the standards for our nutrition and determines the terms of trade.

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The impacts of rising food prices 

Where does this leave South African populations, and in particular, households living in poverty? A 2018 study on the impacts of food prices on short-term and long-term welfare of low-income and vulnerable households in South Africa that shows that a “1% increase in food prices reduces household welfare by 21.3%”[1].  

Social grants remain the most important social safety net for South Africa’s low-income and vulnerable households and individuals. The 2021 General Household Survey by Stats SA reported that 52.9% of South African households rely on some form of social grant from the state to access food and meet other needs. However, the child grant and emergency social relief of distress grant currently sit at 26% to 44% of the Food Poverty Line[2].

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What is the South African government doing? 

At present, the only state measure that directly and tangibly reduces the cost of essential food items is the VAT zero-rated foodstuffs list that was published by the National Treasury in 2019. Other less direct measures include regulations aimed at monitoring the behaviour of retailers and penalising violations of the Consumer Act. This includes monitoring of food prices and margins by the Competition Commission. Most recently, in an intervention that has been described as a drop in the ocean, government implemented an emergency and temporary reduction in the general fuel levy included in the basic fuel price, between 6 April and 31 May 2022. It says it is also exploring long-term measures to mitigate fuel price hikes. 

On the other end of the spectrum of food retail, informal food markets play an important source of food for about 70% of households in poorer neighbourhoods across urban and rural South Africa. It also provides livelihoods for women. The sector supplies food in affordable unit sizes and on credit. It sells fresh produce at lower costs than supermarket fresh produce. It also sells prepared foods appropriate for households that experience income, time, storage and energy poverty.  

Yet the informal food sector continues to be systematically excluded and marginalised in policy thinking. It suffers from discriminatory and violent policing and inappropriate policies that seek to formalise the sector and introduce new barriers to entry in the form of permits and land zoning.

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The government must take immediate actions

Firstly, in the short-term, the government must take action to ensure access to food for all, especially young children and other vulnerable groups. Increasing social grants above the food poverty line is critical. Secondly, there is a need for better oversight and regulation of food prices with the goal of promoting more nutritious diets and ensuring that powerful supermarkets and agribusiness do not prey on consumers and exploit poor and vulnerable households and individuals.  While social grants act as an important buffer for low-income and vulnerable households, temporary and targeted direct food price controls for selected essential food items could help improve food access during moments of crisis.  

Finally, government must provide the informal food sector and small-scale food producers with appropriate support based on the expressed needs of different categories of food vendors and producers. The state is a powerful and influential economic player. Access to markets remains a key challenge for small-scale food producers and public institutional food procurement from small-scale food producers through the National School Nutrition Programme for example, is one way in which the state could support and strengthen livelihoods and local economies. Furthermore, existing state support for small-scale food producers in their differentiated nature is often prescriptive and locks food producers into a capital-intensive model of agricultural production that relies on the use of commercial seeds and agro-chemicals. Instead, government must facilitate the transition from the prevailing fossil fuel-based corporate agro-food system to more sustainable food production by supporting agroecology. 

Financial exclusion is a major obstacle for small and micro businesses operating in the informal food sector. This an area in which public institutions could intervene and provide accessible payments infrastructure that supports small and micro businesses. A digitised and more professionalised system of documenting business operations and the flow of cash could help micro and small business in the informal food sector to access finance and insurance from mainstream financial institutions, in addition to the public funding opportunities that exist.  

The original version of this article appeared in Issue No. 83 of Amandla! August 2022
Amandla! is a left wing media project built around a magazine that publishes six editions per year.

Refiloe Joala is the Food Sovereignty programme manager in the Southern Africa office of the Rosa Luxemburg Stiftung in Johannesburg, South Africa. She is particularly interested in the nature and outcomes of changing agro-food systems within the context of growing corporate control, and she also works on seed sovereignty and farmworkers’ rights in the region.

Header photograph by RLS Southern Africa

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