The battle of the wallet – shrinking income versus rising food prices
They say that ‘tough times never last, only tough people last’ – but even the tough are having to steel themselves against rising food prices. And those at the bottom end of the income ladder are struggling to make it.
According to the Pietermaritzburg Economic Justice & Dignity group’s latest Household Affordability Index, the average cost of the monthly household food basket increased 16.5% (R375,56) from R2,278 in September 2021 to R2,654 in September 2022.
This particular index was based on the input of women living on low incomes in Johannesburg (Soweto, Alexandra, Tembisa and Hillbrow), Cape Town (Gugulethu, Philippi, Khayelitsha, Langa, Delft, Dunoon), Durban (KwaMashu, Umlazi, Isipingo, Durban CBD and Mtubatuba), Springbok (in the Northern Cape) and Pietermaritzburg.
It includes the foods and the volumes of these foods which women living in a family of seven (an average low-income household size) tell us they typically try to secure each month.
The index shows that there have been massive increases in the cost of core foods between September 2021 and September this year:
- Maize meal – up by 23%
- Cooking oil – 56%
- Onions – 26%
- Tomatoes – 56%
- Butternut – 20%
- Brown bread – 21%
- Cake flour – 26%.
And the steep increases are not confined to the food category, but continue in the domestic and personal hygiene category:
- Green bar soap – 28%
- Bath soap – 33%
- Handy Andy – 20%
- Toothpaste – 22%
- Washing powder – 28%
What’s more telling, is the comparison when holding up the national minimum wage against basic household expenses, in light of the new food basket that the Pietermaritzburg Economic Justice & Dignity group used in its Household Affordability Index.
The calculations are based on a family of four, where one household member earns the national minimum wage of R23.19 an hour, and works eight hours a day for 22 days of the month. The transport and electricity costs are based on taxi fares and tariffs in Pietermaritzburg.
The disturbing picture that emerges is one where families are unable to afford their monthly groceries due to the cost-of-living crisis, and a national minimum wage that is woefully inadequate.
The study also reflects that most families prioritise transport and electricity over food costs, which means that if there is a shortfall, it is most likely to be the food on the table.
This dire scenario is not confined to those earning the national minimum wage, but is reflected across all income bands. The food and household cost escalations apply across the board.
And incomes are not keeping pace with inflation.
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The BankservAfrica Take-Home Pay Index data shows fewer salaries were paid in September. This suggests job losses occurred that month on the back of a depressed economy under pressure of higher load shedding levels.
Over and above the prolonged energy supply problems are the elevated input costs, rising interest rates and increasingly higher wage demands placing downward pressure on company profits and margins.
While the average nominal salary has stabilised somewhat in the past two months – moving up 2.4% to R15,063 in September 2022 – it has also become evident that salaries have lagged behind the average headline inflation in 2022.
“In line with expectations, consumer inflation moderated somewhat off the 13-year high of 7.8% reached in July, to 7.5% in September, but remains at elevated levels,” says independent economist Elize Kruger.
This moderation was driven by lower fuel prices. However, the higher food prices and a broader-based upward pressure evident in the consumer basket’s prices offset the impact.
“The average salaried person’s finances are likely to remain strained, as reflected in the 8.3% y/y decline in the real average salary recorded in the BankservAfrica Take-Home Pay Index in September.
“However, as we forecast that July’s 7.8% headline CPI print would be the upper turning point of the current inflation cycle, the pressure should start to alleviate slightly as inflation moderates towards year-end.
“We forecast inflation could be at around 7.2% by year-end,” she says.
An on-the-street survey conducted earlier this year by Think Africa, agency partner of Metropolitan, showed that grocery stokvels remain popular in South Africa.
This is where consumers save enough to collectively spend on household items that every member in the stokvel needs on a monthly or annual basis. But in line with that, more affluent consumers are stockpiling in the sense that they are bulk-buying non-perishable groceries to realise savings, rather than buying smaller amounts more frequently.
For the six months to end June, Massmart’s wholesale division (Makro) showed a 5% growth in total sales compared with the same period last year, and against a decline in sales at stores such as Game and Builders.
Price-sensitive consumers are also dropping expensive name brands in favour of white label brands that offer better value.
And retailers such as Pick n Pay are recognising this with their move to compete in the upper-income space with a Crafted Collection range of products.
They’ve had a no-name range for years, with more than 4,800 products. PnP’s private label range accounts for 25% of its sales – up from 18% five years ago. DM168
This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R25.