Economic development

Power cuts will keep food prices high

South Africa’s rotational power cuts, a daily reality for 2023 so far, will probably prevent food inflation from dropping this year, as it has in other countries. This is the view of the independent Bureau for Food and Agricultural Policy (BFAP).

In its monthly Food Inflation Brief for December 2022, the BFAP said food inflation rose 12.4% over the year, and increased by 0.4% on a monthly basis in December. Food inflation is far higher than the consumer price index (CPI) headline inflation of 7.2%.

The BFAP’s “thrifty healthy food basket”, which measures the cost of basic health eating for low-income households, rose to R3,352 in December, a year on year increase of 12.8%.

This increase came as international food prices were trending downwards. The United Nations Food and Agricultural Organisation (FAO) global food price index dropped 1% in December compared to December 2021. This was the ninth successive month the global index has declined.

Because of regular power cuts, this was unlikely to happen in South Africa, the BFAP report said. 

“The impact of loadshedding on the economy and the food system is severe. 

“Loadshedding increases costs directly, and indirectly through higher rates of wastage and spoilage within food chains. Financial results from several food companies indicate that fuel expenses to run generators during load shedding are skyrocketing. These costs cannot be absorbed in the chain and are to a large extent passed on to consumers.

“In fact, we expect that loadshedding will be a key factor that prevents South Africa from following the global trends of decreasing food price inflation during 2023,” the report concluded.

It did however, point out that South Africa’s 12.4% food price inflation was lower than in the European Union (17.8%) and Kenya (13.8%). It was higher than Zambia (11.9%), Brazil (11.6%), the United States (10.4%) and China (4.8%).