By Lyse Comins

Official food price inflation may have eased to 8% but the cost of some basic food items continue to rise steadily at the upward margin of inflation, or even more, in double digits.

This is according to the latest Pietermaritzburg Economic Justice and Dignity Group’s  Household Affordability Index for September in which it also warns the government of the harm it would cause to consumers if it raises VAT any further than the current 15%.

The treasury reportedly told President Cyril Ramaphosa at a top level meeting held last month that South Africa will have to raise VAT by 1% to 2% to fund the R350 social relief of distress grant as well as cutting down on projects and the public wage bill.

According to the food price survey, which is undertaken at 47 supermarkets and 32 butcheries in six towns and cities ­— Johannesburg, Durban, Cape Town, Pietermaritzburg, Springbok and Mtubatuba — the average cost of the household food basket rose year-on-year by R349.91 (7.3%) to R5 155.77 in September 2023.

Statistics South Africa’s latest consumer price index for August 2023 showed that CPI inflation for food and non-alcoholic beverages was 8% but the price of several essential nutritious food items was shown to be increasing at a higher rate, according to the food price survey.

Foods that increased in price by 5% or more were rice (8%; a 10kg bag rose on average by R11.18, from R146.61 in August 2023 to R157.79 in September), butternut (17%), green pepper (18%), Cremora (5%), bananas (7%), oranges (12%), and peanut butter (5%).

In Johannesburg, the overall basket price increased by R348.39 (7.1%) to R5 250.89, the Durban basket rose  by R192.83 (4%) to R5 007.16, the Cape Town basket increased the most, by R499.46 (10.7%) to R5 172.42. The Springbok basket climbed R328.77 (6.4%) to R5 449.04, while the Pietermaritzburg basket rose R287.89 (6,2%) to R4 942.94 and the Mtubatuba basket increased by R247.53 (4,9%) to R5 329.44.

A basic nutritious basket for a family of four cost R3557.41 in September, according to the index.

The Pietermaritzburg group’s programme coordinator, Mervyn Abrahams, said the rising price of food and the cost of electricity and transport, which consumes 57.4%, or R2 346.92 of a general worker’s average wage of  R4 067.20 meant that families would only have R1720.28 left to spend on food each month.

“Workers’ families will underspend on food by a minimum of 51.6% … In this scenario there is no possibility of a worker being able to afford enough nutritious food for her family.  If the entire R1 720.28 all went to buy food, then for a family of four persons, we are looking at R430.07 per person per month.  This is below the food poverty line of R760,” he said.

In addition, the September 2023 Household Domestic and Personal Hygiene Index, which measures the prices of household cleaning and personal hygiene products, increased by R83.72 (9.2%)  to R996.84 over the past year.

“The cost of basic hygiene products is high. These products compete in the household purse with food [and] are essential for good health and hygiene,” Abrahams said.

Abrahams said increasing the price of VAT to maintain the social relief of distress would exacerbate the poverty cycle down the line.

“The foods that make up the household food basket are those foods which women tell us they try to buy each month.  The household food basket has 44 basic foods, half of which are subject to VAT. 

“In September 2023, the VAT on the basket was R312.83.  By way of comparison, a seven-member household is likely to need 30kg of maize meal per month — 30kg of maize meal costs R309.69 this month. VAT is therefore relatively very expensive, as it is equivalent to the cost of securing the most basic staple food,” he said.

The cost of the 22 foods subject to VAT make up 47% of the total cost of the basket (R2 398.36 of R5 155.77). The VAT of R312.83 on these foods means 6.1% of the household food basket goes to VAT (R312.83 of R5 155.77).

“Households living on low incomes, including social grants, are highly exposed to VAT.  Our data shows that already VAT places a heavy financial burden on households and removes food off the plate.  Talks of increasing the VAT-rate need to be carefully weighed against the current situation whereby so many families are already struggling to put food on the table, and particularly nutritious foods which are also critical,” Abrahams said.

“We argue that the idea to increase VAT is not well considered. It seems to us that it is a knee-jerk reaction to bring in more revenue but it will hurt poor people because poor people pay VAT. The revenue gained from increasing VAT will require further revenue down the line to deal with the suffering caused by raising VAT.

“If poor people are not reimbursed for the money government has taken from them, then government will still have to pay this cost (which will be much higher) because more money will be required in health care because more people will get sick, more money in education because hungry children are harder to teach, more money to quell social dissent because people will get more desperate and more angry, and future economic productivity and growth will be hampered.”

He said the revenue gained from an increased VAT-rate is likely to be less than the revenue that will be required to meet the additional expenditure to counter the negative consequences of the higher tax. 

“It is in all our interests to end the brutal cycle of poverty and grow the economy.  Increasing VAT will not do this. Our current crisis means that we do need the [social relief of distress] grant. Government will have to find the revenue elsewhere,” he said.

He added that zero-rated foods are still relatively expensive and this was not enough to make the basket affordable. Rather, other measures such as subsidisation and higher incomes are needed.

Sourced from Mail and Guardian