Nkosikhulule Nyembezi
CAPE TOWN - Without another Covid-19 pandemic wave, it is the cost-of-living crisis, and particularly its impact on families already struggling to meet their basic household financial needs, that will dominate people’s lives in the next two years.
The SA Reserve Bank’s Monetary Policy Committee (MPC) last week raised the repo rate to 4.25% against a backdrop of higher global and local inflation.
Commentary on the increase indicates that steeper hikes could be on the cards in the coming months.
The economic news is stark. GDP growth is forecast to be 1.9% both next year and in 2024, which is completely inadequate to lift the majority of households out of many years of economic hardship.
Core goods and services price inflation is forecast higher throughout the horizon forecast to increase to 4.2% this year (up from 3.8%) to 5% next year (from 4.4%), before easing somewhat to 4.7% in 2024 (from 4.5%).
It is sobering to accept that the worst is still to come. For many people, the money going out is about to soar, causing the money coming in to shrink in real terms.
This is confirmed in the latest Stats SA Consumer Price Index, published on March 23, showing that fuel prices increased by 2.9% in February and will continue to increase sharply in the coming months in the wake of the Russia-Ukraine conflict.
Annual food and non-alcoholic beverages inflation continued to rise in February, with the rate increasing to 6.4% from 5.7% in January, and 5.5% in December, representing the biggest monthly increase for this category since the beginning of 2019.
Other products with large price increases include ready-mix flour and cake flour (both up by 4.7%), pasta (up by 4.1%), and porridge and macaroni (both up by 2.9%). Brown bread prices climbed by 2.5%.
If elected representatives think they’re unpopular now, they should check back once voters are paying what economists estimate as an extra R1 800 a year for the average household.
Without immediate government action, the human fallout of all of this will be severe.
Two big points need to be borne in mind: first, when basic food items, electricity, and transport fares shoot up in price, households cannot put off their purchases or buy something cheaper.
You either switch to the izinyoka-nyoka self-connection to the electricity grid or resort to unsafe wood and coal fires; you either have enough food or you go hungry; you confront the choice as a job-seeker of using the only money you have to print a CV and take a taxi to submit it at different offices, or you use the money to buy groceries.
Second, although prices are going up for everyone, not all families have the same financial buffer against this storm.
As it is, civil society organisations are warning of the erosion of the buying power of social grants, as well as many more people borrowing to keep on top of their bills.
Food insecurity and fuel poverty look almost certain to shoot up.
Finance Minister Enoch Godongwana has sketched out what should be done immediately to cushion consumers from spiking oil prices: a suspension of the fuel levy that makes up 23% of the price at the pumps.
Over the longer term, the state needs to build up a much bigger renewable energy base so that South Africa is less dependent on international oil and gas markets.
Civil society organisation the Pietermaritzburg Agency for Community Social Action (Pacsa) has consistently advocated through its Food Barometer for an expansion of the list of basic food items exempted from VAT.
In an examination of absolute poverty between 2006 and 2015, the Food Barometer report (2017) shows that one-quarter of South Africa’s population (25.2% or 13.8 million people) lives below the food poverty line, and 55.5% (30.4 million people) live below the upper-bound poverty line.
The latest reports confirm that this trend has worsened because of chronic unemployment, drought, and the Covid-19 pandemic.
Spread across a month, the food poverty line works out to R17.70 a day. Pacsa’s monthly minimum nutritional food basket works out to between R18.22 a day for children to R22.92 a day needed for an adult.
Our elected representatives can claim that their promised work opportunities are the solution, but it is good jobs, not any jobs, that are a reprieve; a significant number of impoverished South Africans last year were in working households.
The official line may be that the pandemic is over, but the pandemic’s shock waves, chronic unemployment and high inflation are still hitting personal finances – just ask the social grant recipient or the security guard struggling to afford maize, bread, and cooking oil to prepare fish and chips.
The result of all this is clear enough: simply getting by is going to become increasingly difficult. It is these mundane issues that appear to bore our politicians, as they see them not as a looming threat, but as an inconsequential sideshow.
That some of the largest annual price increases (February 2021 vs February 2022) were recorded for staples such as oils and fats (+22.7%); meat (+8.6%); vegetables (+7.7%); and fish (+5.3%) may not be glamorous facts to ponder, but they will be part of the single most important issue facing this country in the coming months leading up to the upcoming elections.
That neither the labour market nor the social security system is fit for purpose to weather the storm is not only a deep concern for the future, but a stark lesson in mistakes of the past.
The way out of this will not be found through a different ANC president sitting in the Union Buildings, nor perhaps even a change of party.
What it requires above anything is a recognition that this country is crying out for dramatic change, and that playing by the same old economic rules will not get us there.
This means strengthening social partnerships through balancing power between government bureaucracy and communities, a significant investment increase in infrastructure development, a rejuvenated modern welfare state, and a media willing to hold charlatans to account, rather than help them get elected.
Until then, millions of people in this country are going to find themselves falling below the breadline.
The cost of living is all too high.
Nyembezi is a human rights activist and policy analyst
Cape Times