The latest Household Accessibility Index from the Pietermaritzburg Economic Justice and Dignity Group (PMBEJD) paints a grim financial picture for South African households, where rising prices for food, gasoline and gasoline electricity threatens to leave millions of people without resources.
According to the group, millions of households in South Africa are facing an “intolerably difficult” period as the cost of living continues to rise and prices in key categories far exceed headline inflation.
This is particularly visible in the prices of foodstuffs, which represent the biggest expense in most household budgets.
The PMBEJD noted that even when looking at food prices as a whole, costs are rising well above headline inflation – 2.9% in March – and this only gets worse when you look at key food items for specific groups, such as the poorest households.
- For South Africa in general – South Africa’s Consumer Price Index statistics for February 2021 show that inflation on food and non-alcoholic beverages is 5.2%
- In urban areas – the Food Price Monitor of the National Agricultural Marketing Council shows that inflation on their basic urban food basket is 9.8%
- For poor households – PMBEJD data from the Pietermaritzburg Household Accessibility Index, annualized for March 2021, shows that household food basket inflation is 12.6%
All households will also be affected by an increase of more than 15% in electricity prices, and as much as R1.00 per liter in fuel prices – starting in April.
Although these costs rise well above inflation, the growth in wages and government subsidies is much lower in comparison.
- Child allowance – the annual increase that will take effect in April is 2.2% or R10 per month;
- Retirees will receive an increase of 1.6% or R30 per month;
- The national minimum wage has been increased by 4.5% – or 93 cents an hour;
- The net salary in South Africa increased by 1.4% in nominal terms (0.1% in real terms);
“This means that families are not able to afford this year, which they were able to afford last year, as increases in wages and subsidies are lower than increases in basic goods and services,” said the PMBEJD.
With the maximum minimum wage in March 2021 at just over R3,800, none of the priority food baskets tracked by the group in major regions of the country are affordable.
The group said the situation for South Africans is now worse than before March 2020, while the majority will be poorer in 2021 than they were last year, at a time when the country was in the middle. of the Covid-19 pandemic.
“Jobs continue to be lost. People have less savings and less money. Food is taken out of children’s mouths. Prices of essential goods and services continue to rise… This status quo is unlikely to change and we therefore expect the household affordability crisis to deteriorate further, ”he said.
“When all our money goes to electricity, transportation and food; we should expect our economy to continue to decline. “
What can be done
The PMBEJD said the Reserve Bank should intervene on food prices and fulfill its mandate of keeping inflation between 3% and 6%.
Headline inflation fell below the range, to 2.9% in March, but that was due to big purchases – like appliances and the like – that aren’t typical recurring expenses. This gives the impression that inflation is low across the board, but in reality, basic purchases like food are increasing rapidly.
Headline inflation is used by many companies and bargaining boards as the starting point for salary negotiations.
“This mandate seems to gain momentum when salary levels are negotiated. In these cases, the Reserve Bank denounces “unreasonable” wage demands. The Reserve Bank, however, does not appear to display this level of passion and consistency in intervening to keep the level of inflation on essential goods and services for low-income households low, ”he said.
For example, the group said that there does not appear to be any intervention from the Reserve Bank when Eskom decides to increase electricity tariffs by 15.63%, or when food prices rise above by 10%, or when public transport taxi fares increase by 7%, or even the 25% observed in Gauteng last year.
He said that while basic goods and services far exceed inflation, while low headline inflation is used by employers as an excuse to keep wage increases low, it is local workers who carry the burden. burden and end up subsidizing higher income earners and employers.
Failure to rectify the situation could lead to civil unrest, the group said.
“The triggers, which we have long predicted – where material conditions just become too intolerable and one person, two people, three people start to say, ‘we cannot and will not continue to live in such conditions.’ – will begin to multiply.
“The mood of the public seems to be changing rapidly. It seems to us that a large part of our future depends on the decisions that will be made by hungry men and women, ”he said.
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