Food prices in South Africa are on a tear yet again, underscoring central bank Governor Lesetja Kganyago’s resolve to keep monetary policy tight for longer.
The cost of a basket of goods in Bloomberg’s South African Shisa Nyama Index, designed to show the cost of traditional backyard braais, accelerated to 15% in June year-on-year. That compares with 12% in May.
A blow for South Africans struggling with incessant power outages and a moribund economy, the acceleration reverses a three-month slowdown in price gains. Restaurant owners such as Khunou Nyakale, unable to pass on the costs of items such as onions, which rose 97% in June, to consumers, have been prompted to fire workers.
” It’s getting worse, and we’re just holding on,” said Nyakale, who runs two shisa nyama restaurants, including Meat Meet in Soweto. Fearing that raising prices will drive clients away, Nyakale hasn’t raised prices and instead banks on costs moderating over the next 12 months.
Bloomberg’s index, using data from the Pietermaritzburg Economic Justice and Dignity group (PMBEJD), tracks the prices of some of the key ingredients in a shisa nyama – cornmeal, onions, carrots, tomatoes, curry powder, salt, frozen chicken portions, beef, and wors.
The PMBEJD’s data collectors track 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, Springbok in the far northwest, and the far northeastern town of Mtubatuba.
According to Statistics South Africa, food inflation slowed to 12% in May, while the headline number eased to a 13-month low of 6.3%.
However, the measure has been above the South African Reserve Bank’s target range since May last year, and that will prompt rate setters to keep monetary policy tight for longer, according to Governor Kganyago.
Research conducted by the Bureau for Food and Agricultural Policy shows that rising global food commodity prices, a weaker rand, and persistent power cuts imposed by the state power utility are among the factors that have contributed to rising food prices in the country.
According to Christo van der Rheede, chief executive officer at Agri SA, higher input costs have forced farmers to reduce planting onions. The price of the vegetable may remain elevated for longer.
” We can’t cut out onions,” Nyakale said. ” It compromises on what people come here for. They’ll definitely go somewhere else, and then you’re done.”
