Tough road ahead for South African farmers and consumers

South Africa’s consumer price index inflation remains far above the South African Reserve Bank’s target, despite the most recent interest rate increase since the current cycle of hikes began in November 2021.

- Hamlet Hlomendlini

The interest rate has risen by 375 basis points over this 15-month period.

Furthermore, while commodity and freight costs may be falling, they have yet to trickle down to consumers. This means that South Africans continue to face high food prices as the country’s major retailers raise their prices, particularly on staples such as fats and oils, bread and grains, and animal protein.

Against this backdrop, it appears that food prices will continue for some time to be higher than they were a year ago. The arrival of the COVID-19 pandemic saw many people worldwide going on spending binges at the same time as temporary closures of companies and ports took place.

Ports were congested with containers that could not be shipped due to lockdown restrictions. Stores and warehouses were unable to replenish their inventories, leading to limited supply, while demand simultaneously surged. These two factors (increased demand and constrained supply) worked together to drive up prices at the height of the pandemic.

Unfortunately, just as these COVID-19 pandemic-induced variables were beginning to reverse, Russia’s invasion of Ukraine and the subsequent impact of the sanctions imposed on Russia dealt a blow to the global economy’s recovery.