Poor households suffer as food prices keep climbing

South African consumers face multiple difficulties in 2023, with price rises in electricity, fuel and many consumer goods. To make things worse, food prices keep on going up, contrary to the global trend, and that is unlikely to change in the near future.

While consumers suffer, it is “hugely disappointing” that the government fails to take steps such as removing the 15% value added tax (VAT) from chicken portions which are a staple diet for the poor, said FairPlay founder Francois Baird.

“VAT-free chicken is a pro-poor proposal and it would bring immediate relief to lower-income households who are always hardest hit by food price rises,” Baird said.

“The option is there, but government shows no interest in helping the poor in this way. They could lessen the revenue loss by implementing the anti-dumping duties on Brazil and other countries that were unnecessarily suspended last year.”

Food price inflation has continued to rise in South Africa this year, while it is falling in most other countries.

This trend, which became evident towards the end of 2022, has been maintained in the January statistics released by the United Nations Food and Agricultural Organisation (FAO) and Statistics South Africa.

Global food prices shot up after Russia’s invasion of Ukraine in February 2022 raised prices of fuel, fertiliser and feed. While those prices have remained high, they soon started to ease. The FAO World Food Price Index declined in January for the 10th successive month. Meat prices, including poultry, declined for the seventh successive month.

The opposite is true in South Africa, which a report in the Daily Maverick attributes largely to the impact of the country’s daily power outages, known as loadshedding, and the associated decline of the rand against the US dollar.

While world food prices seem to have peaked, South Africa’s food price inflation accelerated in January to 13.8% from 12.7% in December. This happened despite overall consumer price inflation (CPI) slowing to 6.9% on an annual basis from 7.2% in December.

“While in some regions of the world, consumer food price inflation has started to cool off, South Africa sees the opposite,” Wandile Sihlobo, Chief Economist at the Agricultural Business Chamber (Agbiz), said in a commentary on the data.

Sihlobo said the impact of load shedding had not yet fully worked its way into food prices. That means that South Africa’s cash-strapped consumers will continue to pay higher prices for food this year and that poor people will be hardest hit.

All the more reason, as FairPlay keeps on reminding the government, that implementing VAT-free chicken would help the poor who face increasing hardships this year. 

As food prices rise, 2023 should be the year of VAT-free chicken.