NOMPU SIZIBA: The Pietermaritzburg Economic Justice and Dignity Group released its March Household Affordability Index, noting that in the month the average cost of the household food basket stood at just over R4 000, up 1% on the month of February. However, over the past seven months the group noted that the average household food basket rose by a whopping 4.8%. The organisation says it worries that poorer households are ever more on the back foot as their incomes rise at a far slower level than the rate of inflation.
Well, to take us through the group’s observations, I’m joined on the line by Mervyn Abrahams, the programme coordinator at the Pietermaritzburg Economic Justice and Dignity Group. Thank you very much for joining us, Mervyn. Now, before we get into the nuts and bolts of the index findings, just tell us about your research methodology into the household food basket.
MERVYN ABRAHAMS: Good afternoon Nompumelelo, and good afternoon to all your listeners. The methodology we follow essentially is the food basket methodology. We have women in four different areas of Johannesburg, the Western Cape, Pietermaritzburg, Durban and Springbok. We do focus groups to ascertain the most important of foods that low-income households purchase, in what quantities, and where they are most likely to purchase those goods from. On the basis of that, we construct a list of 43, taken across on average, and we average out the quantities. And then there are women in all those centres of South Africa who generally get the prices at the stores that our focus groups have identified as the most likely places they will purchase those foods.
So the idea is to get a real experience of what goes on around food and food purchasing in low-income households.
NOMPU SIZIBA: What were the key observations around food inflation in the different parts of the country that you survey?
MERVYN ABRAHAMS: Essentially we found that right across the board we have seen food prices increase, with the exception of Springbok, where we had a slight decrease. But essentially food prices continue to increase. As you mentioned, our basket of 43 very basic foods month on month February to March increased by R38.39.
Our basket now stands at R4 039, which is the highest it has ever been over the three-year period.
NOMPU SIZIBA: One of your major concerns around the pace of growth in the average cost of the household food basket is that it far exceeds the rate of low wage or grant increases to the poor. Just illustrate that issue for us, please.
MERVYN ABRAHAMS: If you look, for instance, over a seven-month period, we’ve seen an increase of 4.8% in the cost of our food basket. At the same time this year it’s being presented by the minister of labour that the national minimum wage will increase by 4.5% or R163.63 over one month. We have seen government increasing the old-age grant by 1.6%, and the child-support grant by 2.2%.
Now, all these increases in terms of income are well below the level of inflation we are seeing on food. And, on top of that, the big shocks are still to come because with the 27c increase in the fuel levy and the increasing cost of petroleum, we are bound to see an increase in the cost of goods and services right across the board in South Africa, because farmers use fuel for diesel, food gets transported and so forth. And on top of that we have a 15% increase in the cost of electricity, which is also a major input into the cost of food.
So essentially on the one hand transport increases more and electricity increases more, which means there is less money available to purchase food, while at the same time food prices are also increasing. And that is a perfect storm for households where they are likely to cut back on their food consumption, or cut back on the quality of the food they consume.
NOMPU SIZIBA: And the reason why you’re so concerned about it is because you make the point that those who are on lower incomes tend to spend the vast proportion of their income on these basic goods and services that you’re talking about.
MERVYN ABRAHAMS: Exactly. And so our research with the focus groups we’ve conducted shows that transport, electricity and food consume up to about 75% or more of the income coming into low-income households. Of course, that level of inflation is not reflected in the CPI because food, for instance, is weighted at only 17% of the whole CPI weighting out of a hundred, while in effect low-income households are bound to spend up to about 45% to 50% of their income on food.
So not only is this increase greater, but the official CPI figures often do not capture the lowest-income households in the country.
NOMPU SIZIBA: Mervyn, why are you so critical of the Reserve Bank?
MERVYN ABRAHAMS: Well, we think that it is the mandate of the Reserve Bank – we are always told it’s their mandate to keep inflation between 3% and 6%, and of course they do that in terms of headline inflation. But when it comes to the inflationary pressure on the low-income households, which weighs much greater than that, we do not see the Reserve Bank coming out with statements that say that that is not.
And particularly the Reserve Bank always cautions against increasing wages above headline inflation, while at the same time we are seeing that food, electricity and transport [increases] for lower-income workers far exceed inflation. So the real value of wages is decreasing, as also the ILO [International Labour Organization] global report has shown.
NOMPU SIZIBA: Mervyn, thank you very much for your inputs there, sir. That was Mervyn Abrahams, programme coordinator at the Pietermaritzburg Economic Justice and Dignity Group.