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Food prices up by as much as 30%, and things are only getting worse

| Economic factors

A Pietermaritzburg-based organisation has tracked the increase in the prices of basic goods since the start of lockdown, as well as monitoring the desperate measures people resort to in order to put food on the table.

Food prices have seen an increase of as much as 30% throughout the lockdown period, according to research by a KwaZulu-Natal based organisation, and things could get even worse.

The Pietermaritzburg Economic Justice and Dignity Group (PMBEJD) has released several reports tracking the cost of a basket of food items, and how the prices have changed over the past three months. The latest report was released in the final week of May and if the trends it observed continue, consumers could be in for a very bad time financially.

Coupled with the expected increase in unemployment, and salary cuts being experienced in numerous sectors as the economy crawls back to a start, this is sure to increase food insecurity. Add to this the looming petrol price increase predicted for the end of this month, and consumers can expect a very gloomy month ahead. Commenting on unaudited data released by the Central Energy Fund on Monday (15 June), the Automobile Association (AA) says it expects the price of all grades of petrol to rise by R1.59 a litre, diesel by R1.48 and illuminating paraffin by R1.94.

Social Development Minister, Lindiwe Zulu has also reportedly expressed her concern over the situation, saying she never expected the impact of Covid-19 to be so economically destructive. This just weeks after going up against NGOs which bemoaned the increase of people needing assistance, while her department attempted to centralise donations and food distribution by blocking NGOs from helping the needy.

This had lead to NGO The 1 000 Women Trust approaching the Cape Town High Court in a bid to have her lockdown regulations which prohibited their soup kitchens from operating scrapped, and the court finding that they must be allowed to operate unimpeded.

Similarly, the Gauteng Department of Social Development withdrew their regulations at the last minute, avoiding a court battle after they stopped an NGO from handing out peanut butter sandwiches to impoverished communities on Gauteng’s West Rand.

The PMBEJD’s reports show why these interventions might become more necessary the longer the economic destruction wrought by the Covid-19 pandemic continues.

The research also found that while an increase in social grants had helped, it’s not enough to buffer the price hikes.

During the first month, they saw an increase in the price of their food basket of 5,8% (by R187,08, from R3221 to R3408) from March to April.

Two months later, things have only gotten worse. The report for May showed the prices of a basic food items have increased by an average of 30%, with a family now paying approximately R3 470,92 for a basket of items that cost R3 221,00 before lockdown. This is an increase of R249,92 (7,8% more).

They reach the average increase of 30% by also incorporating the fact that shoppers are now less likely to shop around for better prices.

The usual PMBEJD food basket includes average prices over 5 supermarkets and 4 butcheries. They say the difference in the basket prices between the highest priced shops and the lowest, as well as the difference between the closest lowest prices in the lowest priced shops are averaged, and this means that “since March 2020 (pre-lockdown, R3 221,00) to May 2020, whilst food prices have increased by 7,8%, the additional spend on food and not being able to shop around for food, suggests that households may be spending 30% (R973,93) more on food.”

Their report says:

“The food price increases we are seeing in Pietermaritzburg are considerable. A 7,8% or additional R250 cost on a basic basket of core staple foods over the past two months, for families living on low incomes is a serious financial shock. The basket on the 4th of May is R3 470,92. This is more than the National Minimum Wage of a worker (R3 321,60) who still has a job, is paid at the maximum level of R20,76 an hour, for an 8-hour day and is allowed to work for the full number of working days (20) in May 2020.”

This has, of course, not been the case, with several industries still prohibited from operating, and tens of thousands of South Africans therefore not earning any income or earning reduced wages.

The good news, however, is that restaurants and personal care services such as hair salons are among the businesses which might be able to reopen under ‘Advanced Level 3’ regulations which Minister of Small Business and Development Khumbudzo Ntshavheni announced on Monday morning.

Ntshaveni stressed that this new phase, which is expected to be implemented as soon as Wednesday, is not a move to Level 2, but only an allowance for the reopening of “industries requiring extra protocols.”

She said they were simply waiting for the Health Advisory Council to okay the regulations, and the industries which stand to benefit include hairdressers, massage therapists, nail and manicure services, and some sectors of the hospitality industry.

In the meantime, poor consumers have to put food on the table somehow, and according to the PMBEJD’s May report, they resort to desperate measures to do so. This includes sinking themselves in debt, and making use of loan sharks.

“Loan sharks who used to charge a 30% interest rate on loans, now charge 40%. This is consistent with a higher demand for the money they have available to be loaned out and profiteering off a crisis,” the report reads.

“These types of loans work like this: if R300 is borrowed in May, then either the full amount + the 40% interest must be paid back in June = R300 + R120 = R420; or if the full amount is not paid back, then the 40% interest rate of R120 must be paid each month until the full amount is paid back. So, it is common to pay R120 each month for six months until the full R420 is settled in one lump sum.”

Spaza Shops

Spaza shops are also cashing in on the desparation: “In Spaza shops, if 10kg rice (R120) is taken on credit, then there is no special interest rate. Instead an amount of R10 or R20 will be added onto the cost. This is done per food item. Spaza shop cash loans typically carry a 30% interest rate and work the same as omashonisa loans. The problem though is that if you fail to settle your debt, you also lose access to the spaza shop. Because of this, omashonisa are preferred.”

They say many of the loan sharks hold on to their customers’ Sassa cards and then withdraw the money they are owed monthly, before returning them, while others apparently go as far as confiscating furniture and other goods from the homes of those who can not afford to repay them.

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