2012 PACSA FOOD PRICES BAROMETER REPORT

Transcription

1 PACSA FOOD PRICES BAROMETER REPORT PACSA Affordability Series: Food Price Barometer Report

2 PACSA FOOD PRICE BAROMETER REPORT Mervyn Abrahams October About PACSA The Pietermaritzburg Agency for Community Social Action (PACSA) is a faith-based NGO founded in 1979 that works towards socio-economic justice and transformation. PACSA envisions and works towards a just society where all people are free, able to realize their potential and actively participate in their own development. Thanks We would like to extend our appreciation to Chrispin Phiri for his work in collecting the food price data each month and to Mzwandile Makhoba for analysing some of the data in SPSS software. PACSA contact details PO Box 2338 Telephone: (033) /3 170 Hoosen Haffejee Street Pietermaritzburg Fax: (033) Pietermaritzburg mervyna@pacsa.org.za 3201 South Africa

3 EXECUTIVE SUMMARY The majority of households in South Africa are net buyers of food and food prices therefore directly impact their ability to access sufficient food for their well-being. Food affordability could impact on reducing levels of inequality, poverty and unemployment. The Pietermaritzburg Agency for Community Social Action (PACSA) has been tracking the prices of a basket of food at four retail stores in Pietermaritzburg since This report documents the trends of food price fluctuations of a basket of 32 food products in Pietermaritzburg over the period of September 2011 to September. After recording historical highs in 2008, our 2010 Food Price Report showed that prices decreased and stabilized in 2009 and 2010, though at a higher level than before From September 2011 to September the overall cost of the PACSA Food Basket increased from R in September 2011 to R in September. This is an increase of R68.20 or 5.34% on the value of the basket in September September 2011 September PACSA Food Basket R R Change in ZAR (R136.36) + R68.20 % change 10.60% +5.34% The increase is significantly lower than the 10.60% increase we reported on in This means that food prices increased at a slower pace during 2011 which benefits poorer consumers. The decline in the level of food inflation in the PACSA Food Basket for is at a similar level as that of the official Consumer Price Index Food. During we observed increases, at a slower pace than in the previous year, in the prices of 22 of the 32 commodities in the basket. The products that reflected an upward movement in prices include dairy products, cereals such; sugar; and fats and oils. A major feature of the prices over the past year has been the significant spikes (a sharp increase one month followed by a decrease in the next month) in the prices of a number of commodities. The unpredictable nature of food price spikes has adverse effects on households who cannot adjust their household budgets to take such increases into account or adjust to the shocks created by such price spikes. This impacts poorer households disproportionately because these households have less resources (such as savings) to withstand such shocks. The food price inflation outlook for 2013 forecast increased inflation for the last quarter of and into This forecast is based on a number of inflationary factors, perhaps the most significant at the moment being the current drought in the USA, and other areas, which will lead to significant decreases in cereals output and a resultant increase in international commodity prices. Higher commodity prices will gradually work their way into food prices at the retail level. It is therefore highly likely that the gradual decline in food inflation seen during will be reversed as we move into Affordability of food will remain critical especially for the poorest households who spend large parts of their income on food. This is because income rarely goes up as quickly as does food prices. For some, rising food prices means increasing their household food budget. But for millions others it means going without. 1

4 A central question of this report is whether food is affordable for the poor? In this respect although inflationary pressure has reduced affordability of food remains elusive. This is largely as a result of the low wages and household incomes which is the reality for the majority of households. The table below shows that the lower the income the greater the impact of food expenditure on household income. Thus, even though food inflation slowed over the period of review, from 10.6% to 5.34%, food remains unaffordable for most households when also considering other household expenditure such as municipal services, transport, education and health. Household living on one pension/grant Household living on two pensions/grants The proposed NPC s poverty line PACSA 2010 Household Income and Expenditure Survey Labour Research Service median minimum wage Income PACSA FOOD BASKET: September Income left after purchase of the PACSA Food Basket Food Basket as % of income R R % R R % R2, 926 R % R R % R R % The table below shows the impact on household income if we combine the cost of the PACSA Food Basket and average municipal services bill for a lower income household. Household living on: A single pension/grant two pensions/grants NPC s poverty line PACSA 2010 Household Income and Expenditure Survey LRS median minimum wage Income PACSA FOOD BASKET: September /2013 Msunduzi Municipal Service bill Total for food and municipal services Income left over for other household expenditure R R R R ( ) R R R R R R2, 926 R R R R R R R R R R R R R Food & municipal services as % of income (183.75) R

5 When we consider that 60% of the population of the greater Pietermaritzburg area earns zero to R1600 per month and that 45% of this population may earn from zero to R800 per month and 21% earn nothing at all then the affordability of goods and services by households become starkly clear. 1 Households are experiencing an affordability crisis and this impact on their ability to purchase sufficient and nutritious food. When households do not have sufficient income to purchase food they often borrow which leads to increased household debt. For those who cannot increase the household food budget the only option is to eat less or buy less nutritional food. Such a strategy has possible long-term irreversible consequences for health, productivity, and well-being, particularly if higher prices lead to reduced food consumption by infants and preschool children. Research has shown a link between early childhood nutrition and adult economic productivity and incomes. The first two years of a life is therefore a window of opportunity and healthy, nutritional food is the means to better economic prospects. Not being able to access sufficient and nutritious food could lock people into poverty cycles. This also means that without access to sufficient and nutritious food, the state s financial input into education and health will not deliver results. Our bodies are essential to who we are and without proper nourishment no socio-economic development is possible. As mentioned in our 2011 report the level of inequality in income in South Africa is amongst the highest in the world. This is exacerbated by gender inequality because female headed households are generally much poorer than male headed households, due to a number of social and cultural factors that reduce women s choices and opportunities to earn a significant income. Correspondingly, women are often more vulnerable because of high food prices as they cope more directly with children s hunger. Higher food prices result in more pressure on women to provide food for their families, often at the expense of their own diets. This means that high food prices have the possibility of structurally entrenching and widening the current inequality gap that exist in South Africa. Keeping food inflation low must continue to remain a major policy objective of the country because hunger is not merely a symptom of poverty but one of its main causes. Our research suggests that public policy responses should focus on four areas: Ensuring that staple foods are affordable; Overcoming income poverty through greater employment; Increasing support for small scale farmers to increase agricultural production that provides nutritious and healthy food that is affordable and is grown close to the table; Providing adequate safety nets for those disproportionately impacted by high food prices 1 Julie Smith.. Municipal services in Msunduzi Municipality, Pietermaritzburg: tariff structures, concessions and affordability for low-income households.(unpublished paper). These figures were calculated from the data in the Msunduzi Draft IDP Process Plan in Preparation for /13 Financial Year: 8 3

6 INTRODUCTION Hunger and malnutrition today are not caused by food shortage, or scarcity: hunger is an issue of access to food, to an adequate income, or to productive resources that allow people to either produce or buy enough food. The inequitable distribution of food, land, and other productive resources are the main causes of hunger and malnutrition. 2 Over the past decade the world has seen dramatic increases and extreme fluctuation in food prices resulting in millions of people being pushed into hunger. For some, rising food prices means increasing their household budget for food. But for millions others it means going without. The PACSA Democracy Perception Survey conducted with 450 households in the greater Pietermaritzburg area found that 31.2% of respondents did not have sufficient income to purchase the food they require. The prices of basic food commodities are therefore critical in assessing well-being at household levels. The Pietermaritzburg Agency for Community Social Action (PACSA) has been tracking the price of a basket of food since 2006 at four retail stores in Pietermaritzburg that serve the lower income market. The objective is to gain insight into the fluctuation of food prices in the lower income market and how this impact on the ability of poor households to access sufficient food. Our work is based on the premise that insufficient food and nutrition is a major contributor to socio-economic inequality and that the lack of food is both a cause and result of poverty cycles. All people need strong bodies and minds to be able to earn an income, and without sufficient and nutritious food they will continue to be trapped in poverty. If we do not get sufficient and nutritious food to all households then any poverty-alleviation measure and inputs into education and health are bound to fail to break poverty cycles. Affordability of food is therefore critical to building an equitable society. The PACSA Food Price Barometer documents the trends of food price fluctuations of a basket of 32 food products in Pietermaritzburg over the period of September 2011 to September. It then considers some of the factors that contribute to food inflation. The Report further considers affordability of food and the impact of food prices on the ability of households to access sufficient and nutritious food, and the nexus between insufficient food and poverty. 2. Michael Windfuhr and Jennie Jonsén, Food Sovereignty. Towards democracy in localized food systems, ( 4

7 PACSA FOOD BASKET PRICE FLUCTUATIONS: SEPTEMBER 2011 SEPTEMBER In the period of review the overall cost of the PACSA Food Basket increased from R in September 2011 to R in September. 3 This is an increase of R68.20 or 5.34% on the value of the basket in September September 2011 September PACSA Food Basket R R Change in ZAR (R136.36) 4 + R68.20 % change 10.60% +5.34% The increase of 5.34% is a significant decline in the inflationary pressure on the price of the Food Basket when compared with the 10.6% we reported in the 2011 Food Price Report. 5 A review of the fluctuation of the cost of the basket on a year on year basis also reveals a slowing down of the inflationary pressures. Jan 2007 Jan 2008 Jan 2009 Jan 2010 Jan 2011 Sept Sept Price of basket R R ZAR Change (R136.36) + R68.20 % change % % % % +5.34% Even though we saw lower increases in the cost of the basket the overall year on year cost is still R68.20 or 5.34% higher than in September The PACSA Food Basket consists of 32 products. See Appendix A for the list of the 32 commodities. 4 In January 2011 PACSA instituted a new commodity list for its basket based on the results of its 2010 Household Income and Expenditure Survey with 120 households in 10 areas around Pietermaritzburg. The survey gathered new data on food consumption patterns and incomes. Resulting from this survey we changed our basket from the original 21 items to a basket consisting of 32 items. Some of the quantities of the products in the original basket changed in the new basket. The 2011 basket is therefore a changed one from the preceding period and any comparisons between these baskets must involve adjusting prices. See the 2011 PACSA Food Prices Report. 5 Pietermaritzburg Agency for Christian Social Awareness, Food Prices on the increase again: 2011 PACSA Food Prices Report, October Note the previous footnote on the change in the number of commodities and quantities in the PACSA Food Basket in January

8 1450 MONTHLY FLUCTUATION OF THE PRICE OF THE PACSA FOOD BASKET Series Sep- 11 Oct- 11 Nov- 11 Dec- 11 Jan- 12 Feb- 12 Mar- 12 Apr- 12 May- 12 Jun- 12 Jul- 12 Aug- 12 Sep- 12 The basket reached its peak in December 2011 and thereafter declined but remained at a higher level than at September In this respect we continue to see the trend that when prices come down they stabilize at a higher base than the prices before the price spike. Furthermore, in real terms food prices are increasing and are again at the same levels as in the late 2008 and early 2009, the period during which we experienced what was then seen to be a in food prices. Food prices therefore continue to put pressure on household budgets especially those with the lowest household incomes. PACSA FOOD BASKET: MONTH ON MONTH A month on month overview of the cost of the basket shows that the highest monthly increases occurred during September to December In these two months the cost of the basket increased by 5.28% and 4.10% respectively. The cost peaked in December at R and thereafter declined to R in September, a drop of R68.40 or 4.8%. The biggest increase in the cost occurred in October (5.28%) and further increases were recorded in November and December 2011 as well as in April and August. The biggest month on month decrease in the cost of the basket (R42.72 or 3.08%) occurred between August and September. Basket Price ZAR difference % difference Sept 2011 Oct 2011 Nov 2011 Dec 2011 Jan Feb March R R R R R R R R67.43 R13.44 R R R0.27 -R % 0.10% 4.10% -1.57% -0.02% -1.22% 6

9 Basket Price ZAR difference % difference Apr May June July Aug Sept R R R R R R R9.82 -R R2.80 -R3.00 R R % -1.39% -0.21% -0.22% 1.72% -3.08% The increase in the price of the basket was due to the upward movement of the prices of 22 of the 32 commodities (67% of the basket) in the basket. The highest price increases recorded were for Nalma Sugar Beans (142%); Cheese (45%); Rama Margarine (22%); Maas (19%); Ace Samp (18%), Ace Maize Meal (17%); and Rice (13%); Brown Sugar (10.4); Powder Milk (9.3%); eggs (8.7%), Fresh Milk (7.5%). The table below indicates the month on month fluctuations in the prices of some of these commodities. Currency: Sugar Maize Rama Ace Brown Powder Cheese Rice ZAR Beans Meal Margarine Samp Sugar Milk Eggs Sep Oct Nov Dec Jan Feb Mar Apr May Jun July Aug Sept Ave Incr % Increase The products that therefore reflected an upward movement in prices include dairy products, cereals such; sugar; and fats and oils. Beans recorded a 142% increase, the biggest price increase in this period. Beans are an important source of protein and form a staple food in the diet of poor households. Beans are also an important protein substitute for more expensive meat proteins like chicken and beef. As the prices of meats increase (particularly if the grain price increases); poor households will switch to protein substitutes like beans. The increases in the above commodities are consistent with the national food inflation picture. A comparison of the food basket prices at the different stores shows that the price changes had, for the most part, similar trends across the four stores in the PACSA sample. This would imply that the stores were responding similarly to the factors that influenced the prices of the commodities in the food basket. It would further indicate that it was general food inflationary pressures that caused the increases or decreases in price. 7

10 A major feature of the prices over the past year has been the significant spikes (a sharp increase one month followed by a decrease in the next month) in the prices of a number of commodities. Year on year average increases hide the month-on-month food spikes. For example, the price for mixed chicken portions year on year (September 2011 and September ) appear to be unchanged; however when we look at fluctuations of the price over this period over individual months, then we see the extremes of the price spikes. Chicken (mixed porbons) Goldi 8kg Chicken (mixed pormons) Goldi 8kg Sep- 12 Aug- 12 Jul- 12 Jun- 12 May- 12 Apr- 12 Mar- 12 Feb- 12 Jan- 12 Dec- 11 Nov- 11 Oct- 11 Sep The unpredictable nature of food price spikes has adverse effects on households who cannot adjust their household budgets to take such increases into account or adjust to the shocks created by such price spikes. This impacts poorer households disproportionately because these households have less resources (such as savings) to withstand such shocks. The graph below indicates these price spikes in four commodities in the basket. 8

11 PRICE SPIKES Axis Title Oct- 1 1 Nov- 1 Dec- 1 Jan- 1 Feb- 1 Mar- Apr- 1 May Jun- 1 2 Jul- 12 Aug- 1 Sep Maize Meal Rice Cooking Oil Eggs Chicken FOOD PRICE INFLATION Inflation refers to the overall general upward price movement of goods and services in an economy, usually as measured by the Consumer Price Index. Food inflation is captured as a proportion of the Consumer Price Index and is referred to as the CPI-Food. The Consumer Price Index (CPI), as measured by Statistics South Africa (Stats SA), stood at 5.7 in September 2011 and peaked at 6.3 at the end of January. Thereafter it progressively declined to 5 points in August. For most of 2011 CPI therefore showed a downward trend. Food inflation has historically been an important contributor to the trends in the consumer price index, often pushing CPI higher. During the period of September 2011 to September the CPI-Food increased from 10.6 points to its peak in December at 11.1 points. Thereafter we see a progressive decline to 4.9 points in August. 9

12 CPI & CPI - Food CPI CPIF The above graphs indicate that inflationary pressures in the economy have lessened and this has influenced food inflation. This is confirmed by the PACSA Food Basket conclusions: both show increases between September 2011 reaching a peak in December 2011 and thereafter a decrease. While both indicators, PACSA Food Basket and the Consumer Price Index Food, show the same trends, the levels of the movements differ, as seen in the graph below. 6 4 CPI - FOOD & PACSA FOOD BASKET Oct- 11 Nov- 11 Dec- 11 Jan- 12 Feb- 12 Mar- 12 Apr- 12 May- 12 Jun- 12 Jul- 12 Aug- 12 STATS SA PACSA FB The difference between the Statistics SA food inflation figures and that of PACSA Food Basket could be explained by the different sampling pool used by Statistics SA and PACSA. Unlike Statistics SA, PACSA only collects data from four retail stores that specifically cater for the poorer section of our community. The PACSA basket therefore speaks to the reality of the poorer households in Pietermaritzburg and reflects the prices in 4 retail stores only. Various factors contribute to food price inflation. As mentioned earlier, these factors include production costs, levels of supply and demand as well as other macro-economic factors. Some of the factors that have led to the increase of food prices in South Africa is increasing global agricultural prices, increases in the price of fuel, and the volatility and depreciation of the Rand which has a knock-on effect throughout the economy as crucial inputs (for example, oil and 10

13 many capital goods) are sourced from the international market where prices are dollardenominated. The following graphs show how petrol prices influence the cost of the overall PACSA Food Basket. It shows that fluctuations in both the petrol and food basket follow a similar pattern. It is also important to highlight that both experienced peaks around the same time. R2,000 R1,800 R1,600 R1,400 R1,200 R1,000 R800 R600 R400 R200 R0 Petrol Price & PACSA Food Basket Sep- 11 Dec- 11 Apr- 12 Jul- 12 Oct- 12 Price FluctuaMon of Petrol Food Basket Price It is clear that as the inflationary pressure on the economy increases, so do the prices of basic food commodities. Lower inflation does therefore have a positive effect on net buyers, especially those who do not have the means to increase their household food budget. This is especially relevant for poor households, for whom, higher prices means less food, or less nutritious food, or starvation. FOOD PRICE OUTLOOK FOR 2013 Most local and international food research agencies forecast increases in food inflation in the last quarter of and into 2013 as higher commodity prices as well as increasing costs in the food value chain gradually work their way into food prices. The National Agricultural Marketing Council forecasts ) that the increases in grain and oilseed prices and expected increases in global maize prices, have begun to enter the value chain of food and will therefore lead to increased prices over the next months (in their August Food Price Monitor. 7 The Monitor forecasts that bread price inflation will pick up significantly over the outlook period and could peak even above 20% over the period January to March Their overall assessment is that it is hard to imagine that food price inflation will not rise over the outlook period. Both the United Nations Food and Agricultural Organisation (FAO) and the World Bank announced that global commodity prices have increased significantly around June and July. They attribute this to the drought ravaging large parts of the United States, Russia and 7 See the August Food Price Monitor Report of the National Agricultural Marketing Council at 11

14 Australia, which reduced corn and soybean crop outputs. Both crops form the basis of many processed food products and any increase in these lead to higher commodity prices which will find its way into food prices The South African economist Mike Schussler has also predicted increased food price inflation into the future. He attributes his outlook to the fact that current drought in the United States was already pushing maize prices up, as the US was the largest maize-growing region and the world's major exporter. He further expected that the proposed merger between American seed company Pioneer Hi-Bred and South African company Pannar Seed to increase the price of seed, the second biggest input into local agricultural production, by up to 12 percent. This could be on top of the average price increase of seed in South Africa which is 18 percent. He is of the opinion that we are living in a world where food inflation is going to become a major push factor in inflation in the next few years 8 The outlook into 2013 is therefore one of increasing economic inflation which will increase the production of food and food prices. It is therefore highly likely that the gradual decline in food inflation seen over the past eight months will be reversed as we move into This means that affordability of food will remain critical especially for the poorest households who spend up to 75% or more of their income on food. This is because income rarely goes up as quickly as food prices are rising. At the time of writing this report, a number of labour strikes in different sectors are taking place and the common thread is that workers are finding that their incomes do not allow them to access the basic needs they require such as food and essential services. This outlook therefore raises the possibilities that these strikes are to continue if wages do not increase above current inflation levels. Furthermore, it raises the need for adequate safety nets for those who would not be able to increase household food budgets and would have to eat less or starve. AFFORDABILITY: CAN HOUSEHOLDS AFFORD THESE FOOD PRICES? In a cash-based economy it is income and affordability of prices that determine access to goods and services. Most South African households are net buyers of food. The main determinant for access to food for net buyers is sufficient money and affordability of prices. Household income and the prices of food are therefore crucial in determining access to sufficient food and adequate nutrition. Most households depend for their income on wages or social security. This section looks at household incomes and compares these to the prices of the PACSA Food Basket to determine the percentage of household income spent on purchasing this basket. Data on household incomes vary. The Statistics South Africa KwaZulu-Natal Provincial Profile 2004 states that a large percentage of the working-age population in KwaZulu-Natal was not economically active (50,5%) and 14,2% were unemployed, and whereas only 35,3% of the population was employed. 9 About 3,8% of the employed had no income indicating that such persons rely on payment in kind, such as food or accommodation. 8 SA s food prices face massive inflation. 9 Statistics South Africa. Provincial Profile 2004 KwaZulu-Natal 12

15 KwaZulu-Natal and Msunduzi Municipality are characterized by high levels of unemployment and poverty. In Msunduzi Municipality, of the total population, 41% are of working age but almost half of that is unemployed. About half of the household fall under low income bracket, and about 22% of that have no income at all. The gross individual monthly income of the working-age population is reflected in the table below. Monthly income % None 3.8 R1-R R501-R R1001 R R2501 R R The table shows that about 61.7% of working people had a monthly income of R2500 or less. These figures are consistent with those of the 2010 PACSA Income and Expenditure Survey which included 120 households in the Pietermaritzburg area and showed an average household income of R The Labour Research Service Actual Wage Rates Database in August showed that the median minimum wage across a number of sectors reached R4 000 a month in. 10 This is set out in the LRS table below. Social security is a major contributor to the incomes of a majority of South African households. At least 14.3 million people receive social grants; % of the respondents in the PACSA 10 Labour Research Service. 28 August. A Mineworker s Wage: The only argument against the R is greed See the South African Employment Report at 13

16 Democracy Perception Survey indicated that they receive some form of social grant from the state. Old Age pensions increased from R1140 to R1200 per month in. This is an increase of 5.26%. The Child Support grant increased to R280, a 3.7% increase. What this means is that although increased, especially the old-age pension appears consistent with our year-on-year food basket increase; the total value of the old-age pension is still below that of the total price of the food basket (R vs R ). Moreover, if we consider that there are other competing demands on the social grant it is clear that the value of the social grant is far below the amount required to facilitate the access to food. Discussion on a national poverty line for South Africa has been revived, after years of silence, by the National Planning Commission s proposal of a national poverty line of R418 (in 2009 prices) per person per month. The commission argues that 39% of the population is currently on or under this line. 12 Should this become policy it would translate into R2, 926 for a household of 7 persons, the average household size as reflected by the 2010 PACSA Household and Income Survey. The table below uses a variety of income indices which are compared to the price of the PACSA Food Basket to determine what the percentage of household income which will be spent on purchasing this basket: Household living on one pension/grant Household living on two pensions/grants The proposed NPC s poverty line PACSA 2010 Household Income and Expenditure Survey LRS median minimum wage Income PACSA FOOD BASKET: September Income left after purchase of the PACSA Food Basket Food Basket as % of income R R % R R % R2, 926 R % R R % R R % The above table shows that a household living off a pension would not be able to afford to buy all the products in the PACSA Food Basket and would have to cut back on their food consumption or employ some other survival strategy. A household with two pensions would spend 56.10% of their income on the basket. Should the National Planning Commission s proposed poverty line be implemented, a household of 7 people would spend 45.98% on the food basket while a household with an income of R3000 would spend 44.84% of their income. A household with the LRS median minimum wage would spend % on the basket. The figures show that the lower the income, the higher is the percentage of their income that they spend on food. Income poverty must therefore be addressed as a pre-requisite for access to sufficient and nutritious food. 12 National Planning Commission. National Development Plan. Vision for

17 This concurs with the point made in our 2010 report, that the current CPI food weight of 15.68% used by Statistics South Africa in its CPI basket underestimates the reality of what poor households spend on food. Using the LRS median minimum wage, it is clear that household food expenditure is well above 15.68% of household expenditure. This means that the official CPI-Food index underestimates food inflation for lower income households. An accurate reflection of household expenditure amongst the poorest South African households is necessary, particular if we are to measure the impact of poverty alleviation measures and access to food. Another major household expenditure is municipal service charges (water, electricity, sanitation, refuse and property rates). Municipal service charge for an average lower income household in the Msunduzi Municipality (which includes the greater Pietermaritzburg area where PACSA collects food price data) has increased from R in 2011 to R in. This is an increase of R or 21.97%. These charges include: 350 kwh electricity; 12 KL water; sanitation; refuse removal; and rates on a house with a market value of R Household living on: A single pension/grant two pensions/grants NPC s poverty line PACSA 2010 Household Income and Expenditure Survey LRS median minimum wage Income PACSA FOOD BASKET: September /2013 Msunduzi Municipal Service bill Total for food and municipal services Income left over for other household expenditure Food & municipal services as % of income R R R R ( ) (183.75) R R R R R R2, 926 R R R R R R R R R R R R R R This table offers a clearer insight into the affordability pressures that lower income households face. A household living on a single pension is not able to buy the 32 basic products in the PACSA Food Basket let alone pay for municipal services. A household with two pensions will spend 91.87% of that income on the PACSA Food Basket and municipal services. It is true however that these two categories of households would be considered indigent and should technically be able to qualify for a basket of free municipal services but these concessions are below what could be considered dignified or reasonable for a household. This means that households. Even if registered on the indigent policy would still have to purchase additional electricity and water and therefore have to divert income to purchase these services. A household with an income of R would spend 75.36% on food and municipal services; a household with an income of R would spend 73.50% and a household with R % of their income. 13 Julie Smith,. Municipal services in Msunduzi Municipality, Pietermaritzburg: tariff structures, concessions and affordability for low-income households. Unpublished paper. 15

18 Considering other household expenditure such as transport, education and health, most of these households would have to make choices between purchasing food and fuel, or paying the children s education or going to a medical facility when sick. It is clear that some of their essential needs will not be met because they cannot afford it. This highlights the correlation between affordability of basic goods and financial shocks that push and maintain households into poverty. Another interesting development is the correlation between high electricity prices and the types of food people consume. Due to the current high electricity charges, some people are now buying food that needs less cooking in order to save on electricity costs. This in turn might affect the nutritional level of the food they consume. This is an area that PACSA intends to research in the next year. We can therefore conclude that though food inflation came down over the period of review, from 10.6% to 5.34% it remains unaffordable for most households when also considering other household expenditure such as municipal services, transport, education and health. At root this is a matter of income poverty and low wages, and this should be addressed as a policy priority. The theoretical analysis is brought to life by some of the comments made by respondents in the PACSA Democracy Perception Survey regarding unaffordable food prices: 14 The way food prices have increased, it will be worst next year. We used to buy 25 kg maize for R75.00 and now it is R which means it will be R next year. We cannot afford this! Food is finishing all my income and I end up doing what I don t like, like selling my body, just because I need money to buy food. The government should decrease food prices because you end up not affording because of high prices. The government is eating Kentucky every day. We are suffering. Government must create jobs. There is instability of prices and the cost of living is high in South Africa. There are those who are able to afford and those who can t. THE FOOD AND POVERTY NEXUS KwaZulu-Natal and Msunduzi Municipality are characterized by high levels of unemployment and poverty. In Msunduzi Municipality, of the total population, 41% are of working age but almost half of that is unemployed. About half of the household fall under low income bracket, and about 22% of that have no income at all. 15 An additional challenge the province faces is the highest HIV/AIDS prevalence in the country, which is estimated to be close to 16%, a figure estimated to more than double in densely populated poorer areas. Moreover, KwaZulu-Natal is 14 The PACSA Democracy Perception Survey was conducted with 450 people in 15 areas of the umgungundlovu District. The full report will be released in December. 15 Msunduzi Draft IDP Process Plan in Preparation for /13 Financial Year, July 2011:9 16

19 the province with the largest number of female-headed households (approximately 1 million) of whom 10% or households are in the umgungundlovu District. 16 In the 2010 PACSA Democracy Perception Survey, 31.2% of the 450 respondents stated that they do not have sufficient income to meet food needs at satisfactory levels. The context in which we find ourselves is therefore one of deepening poverty. Not having access to sufficient and nutritious food is only locking these people into ever deeper poverty. A lack of access to food also means that all the investment made into poverty alleviation are not likely to succeed because the very basis of human well-being and thus sustainable development is lacking. Research evidence shows that, as food prices increase, households buy less food and / or they buy food with lower nutritional value. 17 This has long term and irreversible effects on health, productivity and well-being, particularly if higher prices lead to reduced food consumption by infants and preschool children. Even temporary interruptions in intake of energy, protein, vitamins and minerals during the first days of a child s life can lead to permanent reductions in cognitive capacities and, hence, earnings potential. Furthermore, children who do not have a proper nutritional diet are more prone to suffer from serious infections and die from common childhood illness such as diarrhoea, measles and pneumonia. Survivors are often less able to perform well in the workforce as adults, and so their economic prospects are diminished. When they have children of their own, these children are more likely to suffer under-nutrition than the children of healthier parents, and so the cycle of poverty continues. High food prices, if they lead to nutrition deficiency, can therefore have a negative impact on future economic activity of individuals and have lasting effects on socioeconomic development. Hunger and disease feed off each other. Resolving hunger must therefore be seen as a pre-requisite to poverty alleviation and economic development. Therefore, stemming the current increases in food prices is a critical component of poverty alleviation and economic development, because most South Africans are net buyers of food. PACSA s 2011 study pointed out that high food prices seem to have a disproportionate negative impact on female-headed households, for two reasons. First, these households tend to have less access to land and other resources, often because of customary laws and social discrimination As a result, they are less likely to be net sellers of food. Second, these households also tend to be poorer, which means they spend a larger share of their income on food and are more affected by high prices, and thus continue to become poorer. FAO reports that during the Asian financial crisis in the late 1990s, households reduced purchases of more nutritious foods such as eggs and green leafy vegetables in order to continue to buy rice. This led to a measurable decline in blood haemoglobin levels in young children, thus increasing the probability of developmental damage. In addition, mothers in poor families responded by reducing their own caloric intake in order to feed their children better, leading to an increase in maternal wasting. Maternal nutrition and health also greatly influence a child s nutritional status. It is for this reason that the United Nations 6th Report on the World Nutrition Situation calls for a renewed effort to invest in maternal nutrition to break the intergenerational cycle of growth failure. Lack of sufficient and nutritional food at the household level is also likely to impact severely on people living with HIV. Given that KwaZulu-Natal has the highest HIV infection rates in South Africa, the downward poverty spiral is exacerbated in this province. 18 Nutrition is essential for treatment adherence for three reasons: first, some of the negative side-effects of antiretroviral therapy are reduced if medicines are taken with food. Second, adequate nutrition is also 16 See KwaZulu-Natal Provincial Planning Commission. Provincial Growth and Development Strategy 2011:79 17 See 2011 PACSA Food Prices Report 18 Statistics South Africa. Provincial Profile 2004 KwaZulu-Natal. 17

20 important for patients to satisfy the heightened appetite that accompanies treatment. Third, if limited available cash is diverted to food purchases, transportation to clinics (which may be costly in terms of time and money) may be jeopardized, which would lead to defaulting in treatment. Research also indicates that where hunger leads to under-nutrition in mothers, the risk of vertical (mother to child) HIV transmission increases. Ensuring sufficient and nutritional food is therefore crucial in the battle against the HIV/AIDS pandemic. CONCLUSION Even though food price inflation has declined in the future outlook points to increasing food prices. Ensuring access to sufficient and nutritious food should therefore be a priority, both from a human dignity perspective as well as a means to greater socio-economic development. If we are to avoid the depth of the previous food crisis in which hunger deepened significantly for many South Africans, then we need as a matter of urgency to find mechanisms to make food affordable. We therefore re-affirm the recommendation made in our 2011 Report that keeping food inflation low must remain a major policy objective. We suggest that public policy responses should focus on four areas: Ensuring that staple foods are affordable; Overcoming income poverty through employment, Increasing support for small scale farmers to increase agricultural production that provides nutritious and healthy food that is affordable and is grown close to the table, Providing adequate safety nets for those disproportionately impacted by high food prices As mentioned previously, hunger is not only a symptom of poverty but also a major cause of poverty. Food affordability is therefore a pre-requisite for reducing levels of inequality, poverty and unemployment. 18