- South Africa’s annual inflation is the lowest since 2004, but food prices have escalated at a rapid pace.
- Food inflation has risen 6% annually and was affected by pent up demand for food and non-alcoholic beverages.
- Panic buying by consumers helped push prices up.
- Food prices are expected to moderate in the near term, says an analyst.
- For more stories, go to www.BusinessInsider.co.za.
South Africa’s annual inflation slowed to levels last seen 16 years ago, Stats SA has said in its latest set of data. In 2004, the average rate was 1.4%.
The figures show that the annual inflation rate slowed to 3.1% in December, from 3.2%, while the consumer price index rose by 0.2% month-on-month compared to 0% in November. But the cost of food and non-alcoholic beverages was rising fast - these prices were 6% higher.
Paul Makube, senior agriculture economist at FNB said the cost of goods was affected by a strong domestic demand for food during the first half of 2020, which was characterised by shoppers stocking up on food for home consumption.
“Prior to 2020 food prices were contained due to good agricultural output, it continued into 2020 but the dynamics changed when we had strong export demand and also a strong domestic demand with the massive purchases for home consumption during lockdown. The crisis remained relatively strong for the second half of 2020,” Makube said.
Grocery retailers, whose internal inflation rates reached multi-year highs, were the big winners. By the end of the year, Shoprite’s internal selling price inflation was 3.0%, up from only 1.2% in 2019, while Spar’s rose 3.9% from 3.1%. Pick n Pay’s selling food inflation increased by 3.4%.
Makube said that a strong export demand for commodities in the past six months was a major contributing factor in the escalating price of food. A bumper season should have been able to be keep prices subdued, but the strong export demand averted the downward pressure on food prices, he said.
“So, we had such strong demand and exports growing very sharply during that period. That’s what has kept the crisis quite elevated during that period."
Fruits, oils and fats are among the major food categories that are driving food prices higher. They’ve increased 11.8% and 10.2% between December 2019 and December 2020 respectively. Sugar, sweets and desserts rose 8.4%, meat was up 7.3% and milk, eggs and cheese saw a rise of 6.4%. Bread and cereals now cost 5% more.
Makube said there would be some reprieve for consumers and that prices would ease in the short-term, citing a bumper crop currently taking place.
“The current production conditions are favourable for all crops and we expect to see a slight moderation in the months ahead and prices to moderate."
He added that subdued economic growth would show in consumers’ disposable income which would likely maintain food inflation at current levels or even push it slightly lower.
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