Global Courant 2023-04-21 14:44:08
Main image: CNBC
Economists have warned that rising inflation rates, combined with a struggling economy, are putting pressure on South African consumers. In recent months, the country’s consumer price index has risen from 7% to 7.1%, with food inflation reaching 14.4%, the highest level since March 2009. The high cost of food, especially dairy products such as milk, eggs and cheese are driving up inflation and causing huge problems for low-income and working-class households.
Inflationary pressures also worry economists, as they could lead to a rise in core inflation and services inflation. The South African Reserve Bank is concerned about this trend and may respond with another rate hike. The country’s limited energy supply also makes it difficult for inflation to stabilize.
However, there is some cause for optimism as global food prices have started to fall in recent months. According to the Agricultural Business Chamber (Agbiz), food inflation may moderate around May and into the second half of the year due to meat, grain-related products, vegetable oils and fruit. Agbiz also believes that the impact of the load shedding will have an impact on prices in the coming months, but that the mitigating measures companies are taking to improve power supply, as well as the diesel rebate announced by the Finance Minister, will later bear fruit in the year.
After adequate rainfall, South Africa had a favorable agricultural season, and if the rand/dollar exchange rate remains relatively strong, global agricultural commodity prices may soon materialize in the country, albeit with a lag at the retail level.
However, the latest inflation data shows no relief for consumers, as headline consumer price inflation rose 0.1 percentage point year over year to 7.1% in March 2023, up from 7.0% in February, according to Stats SA. The bread and cereals category saw the highest year-on-year increase of 20.3%, although this was lower than the 20.5% year-on-year increase recorded in February this year. Continued cost pressures from the tax shedding will keep food prices up in the short term.
According to Debt Busters, a debt solutions provider, the impact of food inflation on consumer budgets has been apparent for some time. Consumers are spending a higher proportion of their income on basic foodstuffs, which take precedence over debt service. Debt Busters expects the situation to worsen throughout the year, with more money being spent on basic foods as they are necessities of life.
Overall, South Africa’s cost-of-living crisis appears to be worsening as winter approaches. With inflation still rising, consumers are struggling to keep up with the high cost of living. While there is some hope that food inflation will moderate in the coming months, the impact of the tax cut on prices may remain a source of concern. For now, South African consumers are bracing for a difficult year ahead.
