Crisis of rising food prices

South Africa faces a crisis of rising food prices and food insecurity. The food price index rose 16.7 per cent in the year to June 2002 as compared to non-food inflation of 7.2 per cent (Stats SA, 2002b). The price of maize meal doubled in the year to June 2002 and may escalate to even higher levels in the next few months.

Food and maize meal price increases are devastating for the working class. Workers typically spend more than a third of their income on food. The ultra-poor spend over 50 per cent of their income on food (see Figure 1), and up to 20 per cent on maize alone (NIEP, 1995). Over two thirds of ultra poor households are located in rural areas and more than half have members who are pensioners and whose main supporters are women (Watkinson and Horton, 2001).

Food makes up such a high share of spending by the poor that rapid inflation in food prices has a devastating impact on living standards as well as on the efficiency of the economy as a whole. It means the price index for the low-income groups rises far more rapidly than the overall Consumer Price Index (CPI). For households earning below R2030 a month, the CPI in the year to June 2002 rose by between 11 and 14 per cent, compared to 8 per cent for the very high-income group, and 9 per cent for the overall CPI in metropolitan and other urban areas (Stats SA, 2002b).

As a result of the approach taken by Statistics South Africa in calculating and publishing the CPI, it is not possible to demonstrate exactly which items of expenditure are responsible for the 11-14 per cent price increase experienced by low-income households (see Box 1, for a more detailed discussion of the CPI and low-income consumers).

Despite this, it is possible to say that food price increases for low-income households ranged from 18 to 19 per cent and therefore warrant more detailed investigation.