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Eskom’s Electricity Crisis Is Driving Food Inflation Up And Consumers Are Paying The Price

South Africans drowning in a relentless wave of living cost increases are in for another tough few months with food inflation in South Africa expected to remain high until the end of the next quarter, settling at 10% by the end of 2023, according to Trading Economics global macro models and analysts. 

Food inflation is the main contributor to South Africa’s escalating consumer price index inflation rate, increasing the probability of another interest rate hike – and economists agree that the blame can be squarely placed at the door of Eskom’s escalating load shedding crisis.

Neil Roets, CEO of Debt Rescue  points out that South Africa’s food inflation rate surged to a 14-year high in March this year, even though food prices eased globally – primarily because the higher cost of production is passed down to the consumer in the form of rising food price inflation.

According to Agricultural Business Chamber chief executive Theo Boshoff the potential impact of stage five to six load shedding could be devastating to food security. “Cost is the biggest impact on agri-businesses due to load shedding. The average agri-business is spending money on diesel generators at a huge additional cost, which has a knock-on effect on food prices. The impact of all of this is that food becomes more expensive – it is not physical food shortages,” he explains.

Intensified load shedding has also increased overhead costs for many retailers across the country, whether it be the need to buy diesel for their generators or via investments in backup power systems. South Africa’s biggest retailers, including Woolworths, Shoprite, Pick n Pay, Spar and Food Lovers Market, reported a collective spend of over R2.4 billion to mitigate the effects of load shedding over the past year, and these rising input costs inevitably get passed on to consumers.

Roets says the persistent record-setting power outages are adding substantial costs across food value chains, as Eskom heads for the worst year on record in 2023. As always, this means that it will become tougher for consumers, especially those from low-income communities, to afford adequate food to feed their families. He says that while the repo rate reprieve in July was welcome, it is cold comfort to consumers who are still spending extra cash to meet their grocery needs.

A recent survey conducted by Debt Rescue revealed that two-thirds of the nation are now struggling to put enough food on the table to feed their families – with 66% of South Africans saying that they have had to skip a meal in recent months as they couldn’t afford three meals a day.

Against this backdrop the news that the household food basket increased by R25.48 (0.5%), from R5 056.45 in June 2023 to R5 081.94 in July 2023, is akin to rubbing salt into an open wound. Even more disturbing is that the items which increased in price by 5% or more are items like white sugar (7%), potatoes (8%), eggs (5%), and fish (7%) – all staple foods needed to serve up a decent meal. The Household Affordability Index is  conducted by the Pietermaritzburg Economic Justice & Dignity group (PMBEJD), and tracks food price data from 47 supermarkets and 32 butcheries across the country on a month-by month basis.

“People are already buying cheaper and less nutritious food items, just to serve up enough food on the table. Over the long term, this can have a potentially crippling impact – especially on families with young children, whose nutritional needs are no longer being met,” he warns.

Roets says one of his greatest concerns is that people are having to buy food on their credit and store cards just to make it through the month, and that this will drive people to unforeseen levels of indebtedness where they cannot afford to repay their debt.

My advice to those who are in a debt trap is to seek help from a registered debt counsellor who can assist you to manage your financial predicament.  This has been a very successful solution for thousands of consumers who are plagued by over-indebtedness,” he concludes.