It’s official! South Africans are buying less food

South Africans are buying less food as their spending power declines, while statistics show that one in four households go hungry in the country.

In 2023, the volume of food and beverages sold per capita at South African grocery stores and supermarkets declined by an estimated 3.2% when accounting for population growth of an estimated 1.0% during the year.

According to PWC’s latest economic outlook for South Africa, this was caused by a combination of factors, including a decline in consumer buying power alongside elevated inflation and reprioritisation of spending amid elevated interest rates.

In addition, El Niño could cause a 25% drop in local white maize production this year, which will increase the cost of staple maize meal products, Lullu Krugel, chief economist for PwC South Africa, says.

“There is a need to explore sustainable solutions to adequately feed South Africa’s population, which is expected to grow by an additional four million people by the year 2030.

PwC’s research has identified several levers that the broader food industry can pull to meet the current and expected future demand for nutrition in a sustainable way and how to do so without significantly increasing food prices.”

ALSO READ: Food prices stabilising, but still threaten food security

Meeting current and expected demand for nutrition

These levers are:

• Precision agriculture to increase farm production and sustainability
• Smart manufacturing making better use of resources
• Reduced food waste at the retail and consumption level

“As a society, we need to make better use of our resources to ensure that food production is increased and that improved nutrition is available to more people at affordable prices, she says.

This requires agricultural players to produce more food crops sustainably, manufacturers to make food and beverages products more efficiently, and retailers and consumers to cause less loss and waste at the consumption level,” Krugel says.

According to the report, this was the second year the real buying power of salaries and wages declined due to elevated inflation. Food inflation is again under pressure in 2024 due to the effects of drought on cereal production, with the price of maize meal set to increase as a proportion of the national minimum wage.

Data from Statistics SA shows that inflation-adjusted sales at general retailers representing retail trade of food and beverage products at non-specialised stores declined by 2.2% in 2023.

This decline in food and beverage sales volumes is strongly influenced by a weakening of consumer buying power, according to the report.

Salaries and wages increased by around 5.0% last year, while consumer price inflation averaged nearl 6.0%.

ALSO READ: Half of SA population will be food insecure by 2025

Consumers’ buying power decreased for the second year

This implies a 1.0 percentage point decline in buying power following the near 3.0 percentage point decline in the preceding year, PwC says in the report. Families also needed to contend with the reprioritisation of spending.

For example, the prime lending rate increased by 4.75 percentage points in the current monetary policy tightening cycle and monthly home loan repayments are currently at least 40% higher than three years ago.

Increased monthly debt service fees would have also diverted money from other spending categories, including food and healthcare.

The financial strain caused by these and other structural factors, unemployment and poverty, resulted in two out of five South African adults needing to borrow money to buy food in 2023, according to data from FinMark Trust.

It seems that during this year and next year, food security will be under pressure from El Niño-related droughts affecting staple food production and prices.

PwC says food price inflation has declined to the lowest level in four years but nutritional security will be under pressure for the remainder of 2024 and heading into 2025.

While real income growth is expected to be marginally positive this year, pressure on food prices has increased again. Southern Africa experienced its driest February this year in more than four decades, with a study by World Weather Attribution finding that this was mainly caused by El Niño rather than human-caused climate change.

ALSO READ: Household food basket prices for low-income consumers slightly lower in May

Consequences of drought this summer in South Africa

The drought resulted in water scarcity and lower crop yields across the region. South Africa is bracing for a significant drop in maize production this year, according to a late March report by the Crop Estimates Committee (CEC).

The committee projected at the time that the country’s total maize production could decline by 3.2 million tonnes (almost 20%) this year compared to 2023. The white maize harvest used in the production of maize meal products was forecast to fall by a quarter, or around 2.2 million tonnes. The CEC confirmed in late April that it still expected the white maize crop to shrink by 2.1 million tonnes this year.

The Agricultural Business Chamber of SA (Agbiz) also warned in the wake of the CEC’s March report that maize meal prices could increase by 10% to 12% during the second quarter of the year on top of the 35% increase seen over the preceding 12 months.

The increase suggested by Agbiz for the second quarter of 2024 would take the price of a 30 kg bag of maize meal from R294 in April to R330 by June. To get a sense of what this means from a cost of living impact, PwC calculated the ratio between the price for this 30 kg bag and the national minimum wage (NMW).

With the annual upward adjustment in March of the NMW to R27.58 per hour, the bag of staple food costs an equivalent of 6.0% of the monthly minimum income of R4 854.08 based on 22 work days. This was the lowest ratio in two years, but by June this year, the measure could increase again to 6.7%.