Bread prices are falling as South Africans switch back to pap
- Brown bread is now cheaper than in 2014, while the price of white bread is almost exactly the same.
- There is currently a glut of bread in the market as consumers switch back to pap - which grew too expensive because of high maize prices during the drought.
- White bread prices could fall even more if the industry succeeds in getting it VAT zero-rated.
Bread prices have been falling as consumers switch back to pap, and amid a glut of bread in South Africa.
The official Statistics SA price for a brown bread (700 gram) in March 2018 was R11.53 – 65c cheaper than the price in July last year. White bread fell from R13.41 to R12.95.
According to statistics from the Pietermaritzburg Agency for Community Social Action (Pacsa), which has been tracking food prices for the poor for many years, brown bread prices are also currently lower than in 2014.
In its interim results released on Monday morning, Pioneer Foods – producer of Sasko bread – said that its bread profit margins declined due to weaker demand and a more competitive environment.
There is currently a surplus of bread-making capacity, with a lot more competition from smaller players, says Geoff Penny, executive director of the South African Chamber of Baking.
During the drought in SA’s northern provinces, maize prices spiked and South Africans switched from pap to eating more bread. Since the end of the drought, this has normalised and the demand for bread has subsided.
The Chamber is busy with a proposal to National Treasury to consider white bread as a zero-VAT rated. Finance minister Nhlanhla Nene recently appointed an independent panel of experts to review the list of zero-rated VAT items.
“For very poor people, white bread is more economical as you don’t have to add anything (like margarine) to eat it, as is often the case with rougher brown bread,” Penny said.
In contrast, wholewheat bread is zero-rated, but it only represents 1% of the market and is mostly consumed by higher income consumers, says Penny. The South African bread market is roughly equally divided between white and brown bread.
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