Makhulu Klaas, 74, from Mdantsane, a town near East London in the Eastern Cape, is grateful for the extra R90 he will receive every month as part of his parents’ allowance, Finance Minister Enoch Godongwana said in his budget speech last week.
Klaas lives with his daughter, who works as a cleaner, and two grandchildren aged two and 10, in a corrugated iron shack. On one side, there is an asphalt road, on the other, behind the backyard of a small house without a fence, a river.
R90 added to the current R1 980 in pension from April, will help Klaas to buy an extra 5kg bag of meal and another half kilogram of sugar beans. These items are daily staples, which includes analysts to track the price of a basket of basic food.
But when the government gives with one hand, it takes with the other.
From April 1, electricity will cost 18.65% more, after South Africa’s National Energy Regulator approved a price increase by Eskom. Her household spends about R500 a month on electricity, which means an extra R93 on lighting and heating – all funds add up.
The corn and dry beans in the Klaas Grocery basket give the family carbohydrates and some protein — what nutrition scientists call macronutrients. But to stay healthy, people also need meat or eggs, dairy products and vegetables and fruits, according to South African food dietary guidelines. It adds essential micronutrients – vitamins and minerals – to people’s diets.
But about one in five South African households do not have enough food on the table, statistics show 2021, let alone spare money to spend on things like milk and vegetables.
Klaas is better than many others in cities like his because he can grow beans, spinach and butternut in his small backyard.
In many densely populated informal settlements, home gardens are not feasible. These areas can easily become “food deserts” – places where it is difficult to find nutritious food, but high-calorie, low-protein fast foods such as slap chips, sugary drinks and white bread are easier to buy.
How is South Africa supposed to solve the problem of getting people to eat healthy food if they don’t have money to spend on food in the first place?
Here’s one more thing the treasury – and the food industry – can do to make food more affordable.
Quick fix
Government support, such as raising funds for the elderly, provides relief.
In his budget speech, the finance minister also included food producers in the list of industries that could benefit from diesel refunds, which already exist for major producers such as agriculture, forestry and fishing businesses. It will be in effect until 2025 to help reduce inflationary pressures on the prices of basic foodstuffs, such as maize, rice, eggs and amasi.
Child support allowance – R480 per child per month – can finance about three-quarters of a child’s basic food needs. This support is for parents who earn less than R4 400 per month and, according to the budget for 2023, it will be increased to R500 from April and R510 per month from October.
The Covid-19 relief grant (R350 per month for people over 18 with no income and no financial assistance from the government) has proved a critical safety net over the past two years. This extra money, which will be available until March next year, saves 1.1 million children from falling below the food poverty line – a limit that will affect 6.9 million children in 2020. The food poverty line, which is R663 a month now, is money that at least it is necessary to buy food that will give you enough energy for the day.
But this financial buffer is not enough. Statistics South Africa estimates that by 2022 each person in a household will need R945 to live, taking into account food, clothing and other expenses. At R500 a month, this year’s child benefit grant will only cover half of what is needed.
Long game
The long-term solution is to shift to a national food and agriculture policy designed to make healthy food more affordable. The Food and Agriculture Organization of the United Nations (FAO) says government subsidies work if they help consumers buy more food.
But if major producers such as farmers have to accept the prices offered by food manufacturers and large retailers for their products, the plan could fail, FAO said, as it would damage their livelihoods.
The Competition Commission has found that food manufacturers and large shopping chains have a large influence in setting food prices.
Although profit margins on foods such as meat, milk and chicken are relatively low, the Competition Commission’s Essential Food Price Monitoring Report found that they still contribute significantly to retail prices.
For example, in 2020, only about 30% of retailers fill every liter of fresh milk that is in farmers’ pockets, even though farmers put more effort into producing milk than stores do to sell it.
In addition, the August 2022 report notes that the price consumers pay for bread, and also for corn, is rising faster than what retailers pay producers, which, the commission said, suggests price-setting behavior in the chain.
The responsibility of manufacturers and large supermarkets is not only moral, but also financial. Public funding for social grants is a large contributor to the revenue of the food retail market, equal to 30% of the total turnover. This means that the taxpayer is effectively subsidizing part of the profits of the big supermarket chains like Shoprite, Spar and Pick n Pay.
A bold step from food manufacturers and retailers is needed to help people buy nutritious food with the money they have. Being willing to reject the signs in the grocery store of essential foods rated by the Grow Great zero-stunting campaign as “10 best buys”, including eggs, beans, pilchards and peanut butter – if the government’s finances match the commitment – will go a long way.
Based on the report of the Competition Commission, a reasonable estimate is that these discounts by manufacturers and retailers will reduce the cost of the seller of the specified goods by about 20%. The government’s matching subsidy will make it five times more affordable, helping to close the gap between what households need and what they get. Along with the existing VAT exemption status, the price of the basket can be half of what the market can dictate.
Not as usual
The initiative to sell discount food should come from the industry. In Egypt, India and the Philippines, targeted food subsidies have increased household access to food and reduced the prevalence of underweight children. In field studies in several other countries, including South Africa, retail subsidies help people buy healthier foods.
But it doesn’t always work. For example, in China and Iran, the support has no effect, because the subsidy, in this case provided by the government to reduce the cost of food, is kept by the retailer and not passed on to the consumer.
If this idea is going to work, it can’t be done by grudging. Without food retailers willing to share information on how to determine margins on items, the potential of discount food retailers to increase nutrition over the next five years can be underestimated. Also, times are tough for these businesses and it’s possible that the things people choose to put in their grocery carts may not be healthy.
This is a risk that needs to be taken into account and the answer is not yet clear. But what is clear is that the food industry can no longer be excluded from the public debate on how to face the challenge of undernourished countries.
The DG Murray Trust sees itself as a public innovator through strategic investment in early childhood development, education and support for young people entering the labor market.
This story is produced by Check out the Center for Health Journalism. Register for bulletin.