Flood damage will boost inflation and food prices

The impact of last month’s KwaZulu-Natal floods on the regional and national economies has been assessed by risk and advisory services firm PwC South Africa, reports Engineering News.

PwC’s latest South African Economic Outlook report predicts that the widespread flood damage will contribute to slower economic growth, rising inflation and labour costs, and higher unemployment levels.

It also sees supply constraints adding to food price inflation, which was already on the rise following Covid disruptions and the Ukraine war.

“While there is certainly no concern about national food security at this stage, there will likely be some short-term negative impact on the supply of food products, and hence higher prices,” PwC stated.

It notes that road and rail transport, as well as factories and other buildings, have been destroyed in a province that is an important producer of agricultural products, including dairy, poultry and eggs. The port of Durban, a major conduit for the import of foodstuffs, is battling to clear a huge backlog.

“We now expect local economic growth to slow from 4.9% last year to 1.8% in 2022, under our baseline scenario. Slower growth will be accompanied by higher inflation and a new record-high unemployment rate of 35.5%.”

PwC predicted that timid economic reforms would lead to real GDP growth of only 2% a year over the medium to long term, with unemployment rising to 36.9% by 2030.

It’s going to be a long haul for producers, including agriculture, and for consumers, especially in low income households.