Experts have cautioned consumers to remain vigilant about spending, particularly given the long-term trends in inflation that suggest potential fluctuations in the near future.
Dr Solly Molepo, manager for the Trade Research Unit of the National Agricultural Marketing Council (NAMC), told Business Report on Friday that the recent slowdown in the food price inflation from 4.1% in September to 2.8% in October was a positive relief, especially heading towards the festive season.
“This is set to boost consumer confidence for holiday spending because of improved purchasing power for consumers. South Africans can expect lower price increases on a range of food products, more stable and predictable food prices which could help stretch their budgets further,” Molepo said.
“For example, basic groceries and holiday meals could see more moderate price increases, making essential food items more affordable particularly for lower income households.”
During October, the nominal cost of the NAMC’s 28-item urban food basket amounted to R1 296.49 compared to the R1 288.81 reported in September. This represents a monthly increase of 0.6% and a year-on-year increase of 6.1%.
Meanwhile, Agricultural Business Chamber of SA (Agbiz) chief economist, Wandile Sihlobo, on Saturday said that with the winter wheat harvest in the Western Cape approaching completion, the yields were broadly fair in most regions of the province, which meant South Africa could somewhat meet the current crop forecasts of around a million tons of wheat harvest in the province.
The Western Cape is South Africa’s major wheat producer because of favourable winter rains. Other notable wheat producing provinces are the Northern Cape, Free State, and Limpopo, but production in these provinces is under irrigation.
Nationally, South Africa’s 2024-25 wheat harvest forecast is 1.96 million tons, down 4% year-on-year, but the Western Cape still expects a larger harvest than the 2023-24 season.
However, Sihlobo said the challenge for the Free State and Limpopo was beyond the prices as they experienced a severe mid-summer drought, which led to significant summer grain losses.
“When the winter wheat season started in May, farmers' mood was downbeat, and they worried about soil moisture. Others may have wanted to conserve soil moisture for the new summer crop season,” he said.
“Thus, we saw lower plantings and relatively lower expected yields in some areas. These challenges have contributed to the 4% expected national decline in the 2024-25 South African winter wheat harvest.”
Earlier this month, AgriCulture South Africa (AgriSA) chief economist Kulani Siweya said Eskom’s proposal for significant tariff increases posed substantial financial risks to the agricultural industry and, by extension, to food security and economic stability in the country.
In its submission, AgriSA urged the energy regulator to consider the unique challenges facing the sector and to ensure that Eskom’s operational inefficiencies were addressed before any revenue increases were approved.
It called Eskom’s tariff increases an unsustainable burden saying that the agricultural industry is particularly sensitive to energy costs due to its high energy reliance, making it vulnerable to rising input costs.
“Any substantial increase in electricity tariffs could lead to higher food prices, reduced profitability for farmers, and even jeopardise food security,” Siweya said.
“This is especially concerning for sectors like grain, horticulture, dairy, and poultry, where energy-intensive processes are integral to production.”
According to the Department of Agriculture, Land Reform and Rural Development, the sector’s annual expenditure on electricity amounted to approximately R10.4 billion in 2023/24, translating to between 10-20% in variable costs, which accounts for approximately 25% of total agricultural production.
AgriSA said this figure can quickly skyrocket if the current trend of tariff hikes continues. “To put it into perspective, electricity tariffs were 264% higher in 2024 compared to 2011, according to data from BFAP- this cost item represents an annual percentage increase of 9%, far outpacing other agricultural input costs and commodity prices (annual percentage change of 5-6%).”
BUSINESS REPORT