Despite government raising the Value Added Tax (VAT) from 14 percent to 15 percent in April this year‚ some foods – including oil‚ bread‚ fruit and sugar – are cheaper than they were a year ago.
“A closer look at the data suggests that much larger forces than VAT are at play [like] tough economic conditions and the recovery from drought. A sluggish economy has constrained consumer spending‚” Statistics South Africa (Stats SA) said in an analysis published this week.
Stats SA looked at the latest Consumer Price Index (CPI) and found that bread and cereal were 3.1 percent cheaper in June this year than in 2017‚ while fruit prices dropped by 3.2 percent in the same period.
“The average price for a loaf of brown bread was R12.24 in June 2017‚ falling to R11.53 in June 2018‚” the statistics authority said.
It’s not all good news‚ though.
Meat‚ fish‚ dairy and vegetables became more expensive. You would have paid‚ on average‚ R47.37 for a kilogram of hake in June this year compared to R41.09 last year.
Overall‚ the basket of food that is used to measure the CPI would have been 0.1 percent cheaper in June this year compared to April when VAT was raised.
Stats SA added that the country was emerging from one of its worst droughts‚ which led to a rise in food inflation in 2016.
“The years 2015 and 2016 were particularly bad‚ with 2015 the driest year on record since 1904 when rainfall measurements began.”
According to the South African Grain Information Service (SAGIS)‚ there was a 45 percent drop in maize production in 2015/16 compared with 2013/14.
Stats SA said: “Agriculture began to find its feet again in 2017‚ contributing to a slowdown in food inflation. The grain industry bounced back relatively quickly‚ recording its most successful commercial maize season ever in 2016/17.”
Stats SA pointed out that bread and cereal inflation slows down quicker than meat prices‚ because it takes longer for production to recover.
“During a severe drought‚ cattle farmers are unable to feed their stock‚ and they are eventually forced to cull their herds. For a brief period of time‚ the increased supply of meat causes prices to stabilise or even fall. It takes time to rebuild herds once the rains return‚ causing a lack of meat once the initial surge in supply ebbs away. Meat inflation then starts to climb as a result.”
BY NICO GOUS – TimesLIVE
Source: TMG Digital