Fuel price decrease not expected to lead to lower food prices yetJanuary 7, 2023
Motorists can breathe a sigh of relief following the Department of Mineral Resources and Energy’s announcement last week, of a substantial drop in the price of petrol and diesel, but this fuel price decrease is sadly not expected to ease food prices in 2023.
A litre of 95 unleaded petrol now costs R21.40 inland and R20.75 at the coast thanks to an average Brent Crude oil price decrease from $88.77 per barrel to $85.08 per barrel. Oil prices also continue to decrease in response to fears of a global economic recession.
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However, the hope of a corresponding drop in the price of basic foodstuffs is set to be dashed for millions of South Africans who are battling to put enough food on the table, as prices are expected to remain high or even increase further.
According to the latest food inflation brief from the Bureau for Food and Agricultural Policy (BFAP), food prices in South Africa remain at elevated levels, and consumers should expect higher prices going into 2023.
“We expect that food inflation could peak in the first quarter of 2023, after which the higher base effects apparent from March 2022 will result in smaller inflationary effects during the rest of 2023,” the bureau says.
Although any financial relief is good news for South African consumers, it offers little comfort for the millions of families who head into 2023 in a financial position that is far worse than in 2022.
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Food prices to remain at distressing levels
“Food prices remain at distressing levels for the average consumer and the prices, especially of staple foods, continue to rise, regardless of decreases in inflation, petrol or diesel prices while authorities are either unable or unwilling to explain this continuing trend,” Neil Roets, CEO of Debt Rescue, says.
“With each petrol price increase in 2022 we saw the second-round inflationary pressures add up and hit consumers with a cost of transport increase, in addition to the increase that is passed on from retailers who need to transport food to their stores.”
However, previous decreases in fuel prices during 2022 did not see a subsequent drop in food prices. In fact, Roets says, food price inflation went in the opposite direction.
“With 81% of South African households now fighting a daily battle to put enough food on the table, what respite can authorities offer, to give people some hope for the future?”
The BFAP says food inflation will probably remain high over the next three months as the full effects of persistently increasing commodity prices and weaker exchange rates filter through to retail markets. The two variables that should be monitored to gauge inflation rates during 2023 are global maize prices and the Rand/Dollar exchange rate.
ALSO READ: 2022 left the middle class in mountains of debt
No respite for consumers after tightening belts
“South Africans have tightened their belts down to the last notch and now there is nowhere left to go,” warns Roets.
“This is especially concerning considering other factors such as interest rates which have been on an upward trend and will likely remain high for the foreseeable future, while the Reserve Bank keeps a close eye on inflation. The effects of rate hikes are only felt after six or nine months and, therefore, consumers cannot expect any respite here either.”
He adds that the aftermath of the festive season spending trend will almost certainly lead to South Africans leaning even more heavily on their credit and store cards to get through January. “In fact, we foresee that people will be in more trouble this year than ever before,” he warns.
“My advice to those who fall into this trap is to seek help from a registered debt counsellor who can assist them to manage their financial predicament. This has been a very successful solution for thousands of consumers who are plagued by over-indebtedness.”