by Aug 18, 2022All Articles

SOUTH AFRICANS ARE CONTENDING with a rapidly unfolding food crisis, marked by rising transport and food prices. As they do so, high levels of unemployment, unchecked inequality and deepening poverty continue under the watch of the South African State, threatening the right to food of the most vulnerable in our society. According to Stats SA, annual consumer inflation reached 7.4% in June 2022, the highest reading since May 2009 (8%), during the global financial crisis.

Meanwhile, the supermarket and agribusiness giants that run South Africa’s agro-food systems are reporting increased sales and growth, in the middle of this global food crisis. Africa’s largest food retailer, Shoprite, reported a double-digit growth in sales at 10%, while agribusiness giant, Astral food, reported a 26% growth in total revenue between October 2021 and March 2022. This article takes stock of what drives food price increases, which take place in the context of relatively limited oversight and regulation of food prices in South Africa. It challenges the dominant corporate food system from a right-to-food perspective. I argue that high levels of corporate concentration lead to higher food prices that disproportionately affect the poor. The declining welfare status in the country points to how the South African government continues to scrimp on its obligations to ensure the realisation 0f the right to food.

Causes of food inflation

The supermarket and agribusiness giants that run South Africa’s agro-food systems are reporting increased sales and growth, in the middle of this global food crisis.

A research brief by the Bureau for Food and Agricultural Policy (BFAP) reported that food inflation rose by 7.6% in May 2022, compared to 6.7% in May 2021. The picture is much bleaker for low-income households. Pietermaritzburg Economic Justice & Dignity Group (PMBEJD) takes a closer look at what the increasing consumer price inflation means for low-income and vulnerable households across some of South Africa’s major metros. It reported a 13.6% year-on-year increase of food prices in June 2022. This amounts to an increase of R560.57 in the food basket of low-income households in June 2022 compared to June 2021. Among the 44 essential food items tracked in the flagship Household Affordability Index, the PMBEJD recorded year-on-year price increases of 11% for maize meal, 15% for brown bread and 69% cooking oil.

Indeed, the increased price of sunflower oil in South Africa, as reported in countries in the European Union like Germany, has been widely attributed to the Russia-Ukraine conflict. But it is unclear if this argument holds for broader food price increases. South Africa imports about 38.5% of its total oilseed consumption. There is an impact from the protracted Russia-Ukraine conflict and increasing oil prices. However, the scope of these increases is limited by the import exposure for particular commodities. In particular, the Competition Commission highlights that the level of imports relative to consumption is actually rather low for essential foods such as fresh vegetables, fruit and milk. Nonetheless, food price hikes have not been limited to high import commodities such as chicken, wheat and sunflower oil only.

Are high food production costs being passed down to consumers?
When we shift our attention to fuel prices, we see that higher fuel prices increase consumer inflation. Therefore, recent food price hikes come as no surprise amid skyrocketing fuel prices, which were already on the rise before the war in Ukraine. Furthermore, factors like seasonality can also play a role in pricing patterns. However, the Competition Commission argues that disparities between farm-gate prices and retail prices raise questions about pricing in commodity chains. They are affected to some extent by the anticipation of price hikes among food retailers. There are high levels of concentration in South Africa’s agro-food systems. Five big supermarket chains dominate the food retail space. So price increases as a result of oligopoly power have been raised by the Competition Commission in its 2019 Grocery Retail Market Inquiry report. This proposition
is supported by a multitude of empirical studies globally, showing an inverse correlation between food prices and food retail concentration. In other words, greater concentration in a given market (in this case food retail) correlates with higher industry prices and profitability.

According to the National Agricultural Marketing Council, the retailer margins for super maize meal increased by 3.69% between April 2021 and April 2022, while the farm value share decreased by 1.48% in the same period. This could very well be because of massive increases in petrol and diesel prices from 2021. But data on where the value is actually captured is slightly
more challenging to access. The data available lumps together the contributions of food manufacturing, distribution, wholesale, and retail firms.

There is a narrative that says that “economies of scale” are the reason for the considerable power and influence that supermarkets wield in global food systems. But there is a story beyond sales volumes: highly processed and intensively addictive cheap food combines with crafty and unchecked marketing to create armies of loyal customers. This plays an even bigger role in maintaining the profitability of supermarkets versus smaller food retailers. This is what Lisa Jack, the author of The secrets of supermarketing: a model balanced on a knife-edge, describes as “a food system characterised by over-purchasing, over-eating, over-production and waste.”

The informal food sector continues to be systematically excluded and marginalised.

Effects of food prices
Where does this leave South African consumers, and, in particular, households living in poverty? There is a 2018 study on the impacts of food prices on short-term and long-term welfare of low-income and vulnerable households in South Africa that shows that a “1% increase in food prices reduces household welfare by 21.3%.” Social grants remain the most important social safety net for South Africa’s low-income and vulnerable households and individuals. The 2021 General Household Survey by Stats SA reported that 24% of South African households rely on some form of social grant from the state to access food and meet other needs. However, the child grant and emergency social relief of distress grant currently sit at 26% to 44%
of the Food Poverty Line.

What is the South African government doing?
At present, the only state measure that directly and tangibly reduces the cost of essential food items is the VAT zero-rated foodstuffs list that was published by the National Treasury in 2019. Other less direct measures include regulations aimed at monitoring the behaviour of retailers and penalising violations of the Consumer Act. This includes monitoring of food prices and margins by the Competition Commission. Most recently, government implemented an emergency and temporary reduction in the general fuel levy included in the basic fuel price, between 6 April and 31 May 2022. It says it is also exploring long-term measures to mitigate fuel price hikes.

The informal food retail market is an important source of food for about 70% of households in poorer neighbourhoods across urban and rural South Africa. It also provides livelihoods for women. The sector supplies food in affordable unit sizes and on credit. It sells fresh produce at lower costs than supermarket fresh produce. It also sells prepared foods appropriate for households that experience income, time, storage and energy poverty. Yet the informal food sector continues to be systematically excluded and marginalised. It suffers from discriminatory and violent policing and inappropriate policies that seek to formalise the sector and introduce new barriers to entry in the form of permits and land zoning.

The government must take immediate actions
In the short-term, the government must take action to ensure access to food for all, especially young children and other vulnerable groups. Increasing social grants above the food poverty line is critical. In addition, there is a need for better oversight and regulation of food prices with the goal of promoting more nutritious diets and ensuring that powerful supermarkets and agribusiness do not prey on consumers and exploit poor and vulnerable households and individuals.

Finally, government must provide the informal food sector and small-scale food producers with appropriate support. This must be based on the expressed needs of different categories of food traders and farmers. This will help to secure food access and livelihoods for millions of South Africans. In the medium- to long-term, government must facilitate the transition from the prevailing fossil fuel-based corporate agro-food system to more localised food markets and production in the interest of pursuing more resilient and sustainable food systems.

Refiloe Joala is the Food Sovereignty programme manager at the Rosa Luxemburg Stiftung Southern Africa office in Johannesburg. Her research focuses on the nature and outcomes of changing agro-food systems in Southern Africa. She also works on seed sovereignty and farmworkers’ rights in the region. 

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