Shisa Nyama Index: Has food inflation reached its peak?

Bloomberg’s Shisa Nyama Index shows that inflation may have peaked, which is good news for consumers who have been paying increasingly more for food over the past few months.

The cost of a traditional South African braai only increased moderately in January after it dropped sharply in December, which confirms the forecasts of the South African Reserve Bank (Sarb) that punch-drunk consumers may continue to see food prices ease.

According to Bloomberg’s Shisa Nyama Index, the average price increase for a backyard barbecue was 6.2% in January compared to a year ago, the same as December, but significantly less than the 10% recorded in November.

That correlates with the 8.5% year-on-year increase in food prices in December as measured by Statistics SA. The Sarb forecasts food inflation to average 5.7% this year. The biggest contributors to keep the index steady as they eased were onions, cooking oil and samp.

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Food prices in January

Year-on-year price changes in the index are:

• 10kg of onions were 26.6% cheaper;
• 5L of cooking oil was 15% cheaper;
• 5kg of samp was 0.8% cheaper;
• 30kg of maize meal cost 0.9% more;
• 2kg of beef cost 1% more;
• 2kg of wors cost 2.4% more;
• 8 bunches of spinach cost 5.5% more;
• 10kg of chicken portions cost 5.5% more;
• 10kg of carrots cost 10.5% more;
• 200g of curry powder cost 12.8% more;
• 6kg of tomatoes cost 15.8% more;
• 1kg of salt cost 15.8% more;
• 2kg of green peppers cost 27.9% more;
• 10kg of potatoes cost 32.1% more.

(These amounts and prices are for four people for a month.)

The index that crunches data from the Pietermaritzburg Economic Justice and Dignity group, tracks the prices of 14 key ingredients in braais consumed in South African townships. The group tracks food prices on the shelves of 47 supermarkets and 32 butcheries that target the low-income market in the greater areas of Johannesburg, Durban, Cape Town, Pietermaritzburg and the northwestern town of Springbok.

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Sticky food prices driving inflation

Sticky food prices have been a key driver of overall inflation and contributed to Sarb’s Monetary Policy Committee (MPC) retaining interest rates at a 2009 high of 8.25% since July.

After the MPC’s January meeting, Sarb governor Lesetja Kganyago said while inflation eased during the latter part of 2023, it must trend lower to the midpoint of the Sarb’s 3% to 6% target band, where it prefers to anchor expectations.

“There is not a discernible trend that shows that inflation is declining towards our target. For as long as there is no sustained decline of inflation towards our target and more importantly that inflation stays there in a sustained manner, do not expect us to recalibrate policy.”

Better-than-expected rainfall in South Africa at the end of last year and in January may mean that an anticipated drought from El Niño-induced weather conditions has been averted and could help to keep food inflation in check.