South African consumers this year have been faced with high food prices and the escalating cost of living, leaving them squeezed at the shopping tills and looking for bargains. Photo: Ayanda Ndamane/ African News Agency(ANA)
Food prices are likely to remain volatile in South Africa at least during the first quarter of next year, says Thabile Nkunjana, an agricultural economist for Agro-Food Chains in the Markets and Economic Research Division of the National Agricultural Marketing Council.
South African consumers, this year, have been faced with high food prices and the escalating cost of living, leaving them squeezed at the shopping tills and looking for bargains.
He said in an interview that in November, consumer inflation in South Africa decreased to 7.4% but remained extremely high at 12.8% for food, 8.3% for electricity and 25.3% for fuel.
“Fortunately, if it materialises, the cost of petrol should decrease by noticeable at the start of 2023, which will assist to reduce the pressure caused by rising living expenses for everyone.
“Multiple causes, including drought in major food-producing regions throughout the world, protracted supply chain bottlenecks, high transportation costs, and the conflict in Ukraine, contributed to the rising food price inflation. Even while some of these have improved, there is still a cloud over the food supply, which has an impact on prices,” Nkunjana said.
For instance, grain exports from the Black Sea region to other parts of the world had resumed, transportation costs had returned to normal levels, while fertiliser costs were declining but still high.
All of these factors ought to contribute to a decrease in food prices in the first few months of next year.
“Despite these encouraging developments, there are still several issues that could have an impact on food prices globally. This includes the ongoing conflict in Ukraine and its effects, weather concerns in some countries, such as Argentina, currency concerns in various countries and rising interest rates, which negatively affect consumers whose incomes are being squeezed to pay off debt.”
Load shedding would remain a persistent problem that held back the agricultural sector and the country’s broader economy, he said.
This as clear signals have emerged from the government that load shedding was going to be around for the foreseeable future.
With regards to the agricultural sector, Nkunjana said it was on a growth path, with productivity increasing, despite the challenges.
As a result, South Africa must put more focus on growing its export market footprint.
“Asia is one region that South Africa should focus on for a variety of factors, including the region’s growing population, promising economic prospects and high urbanisation. The administration is already looking at this, but government-to-government negotiations often take time for a variety of reasons,” he said.
Nkunjana said South Africa was also expected to have favourable weather conditions, and it was likely that the agricultural sector's export earnings would be good.
“Data as of the third quarter mirrors promising results with an increase of around 6% as of August 2022, which is commendable given the circumstances both domestically and globally,” he said.
But he cautioned that Foot and Mouth Disease, which resulted in wool exports being banned from China, which is a key market for the industry, and a cattle movement ban, would remain a serious threat to the livestock sector in the near future.
“Fears persist around the outbreaks but the state and the industries are working hard to contain disease outbreaks and to ensure that the livestock sector thrives.”
Nkunjana said that the trade data for the third quarter of 2022 showed that citrus shipments to Russia were looking better than expected despite analysts painting a bleak picture of the Russian market due to the conflict in Ukraine, logistical issues caused by significant logistic companies fleeing Russia, and sanctions from the West. This was positive news for the citrus industry, which is one of the key exportable products from South Africa.
Despite the difficulties the sector had encountered from floods at the beginning of the year - export bans for citrus, vegetables, and wool as well as poor infrastructure conditions - the agricultural sector strongly supported the gross domestic product in Quarter three, which climbed by 1.6%.
“With better collaborations among all stakeholders, more progress in transformation and inclusive growth, the agricultural sector may even contribute more. The introduction of blended finance is a significant step for the agricultural industry and has the potential to revitalise the Land Bank, which was experiencing some difficulties,” Nkunjana said.
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