South Africans are grappling with the dual blow of load shedding and escalating food prices, a new report by Competition Commission's Essential Food Price Monitoring Report has revealed.
The report highlights the significant impact of load shedding on the food value chain, exacerbating the cost of living crisis for millions.
Load shedding, a recurring issue in South Africa, has long been a thorn in the side of businesses and households.
However, its ripple effect on the food industry is now coming to the fore. The report suggests that while upstream inflationary pressures in commodities and food production have eased, consumers are yet to benefit from lower input costs.
The reason? Load shedding.
Food companies across the board have reported load shedding costs. Premier Foods, for instance, incurred R32 million in load shedding costs in 2023, which, although not having a material impact on operations, still adds to the cost structure. RCL's Rainbow division faced a staggering R158.3 million in incremental load shedding costs, primarily attributed to high feed costs, failing municipal infrastructure, and the resultant generator and additional labour costs.
In addition, load shedding's impact on retailers is causing a massive financial strain on major retailers.
According to the Competition Commission report:
– Pick n Pay reported an additional R522 million in diesel costs in 2023.
– Shoprite's South African Supermarkets division incurred R1.3 billion in load shedding expenses.
– Woolworths faced R20 million to R30 million in load shedding-related food waste and diesel costs.
– Spar spent over R700 million on diesel costs in just six months.
While the financial results of food companies and retailers present a mixed picture on the costs of load shedding, the report calls for caution when explaining its role in food prices.
However, it's undeniable that load shedding has played a part in slowing the pace of downward price transmission.
The beef value chain, a significant protein source for South Africans, has not been spared.
Despite declining beef carcass prices since September 2022, retailers have been slow to reduce prices, potentially due to the combined effects of lag and attempts to maintain profits in the face of higher costs from load shedding.
As South Africans brace themselves for more power cuts, the question remains: How much more can consumers bear?
Economists say that the intertwining of load shedding and food prices is a concerning trend, one that threatens to deepen the cost of living crisis for many.
IOL NEWS