Shisa Nyama Index shows SA food inflation may have peaked

The cost of a traditional South African barbecue increased moderately in January after a sharp drop the prior month, confirming the central bank’s forecasts that beleaguered consumers may continue to see elevated food prices ease.

Bloomberg’s Shisa Nyama Index shows the average price rise of a backyard barbecue was 6.2% this month on an annual basis, the same as December but significantly less than the 10% recorded in November. That compares with 8.5% year-on-year increase in food prices in December, as measured by Statistics South Africa. The central bank forecasts food inflation to average 5.7% this year,

Onions, cooking oil and samp — an ingredient made from dried corn kernels — were the biggest contributors to the index remaining steady as they eased.

The gauge, crunching data from the Pietermaritzburg Economic Justice and Dignity group, tracks the prices of 14 key ingredients in barbecues — known locally as a braai — consumed in South African townships.

To compile its survey, the PMBEJD’s data collectors track food prices on the shelves of 47 supermarkets and 32 butcheries that target the low-income market in the greater areas of Johannesburg, Durban, Cape Town, Pietermaritzburg and the northwestern town of Springbok.

Sticky food prices have been a key driver of overall inflation and have contributed to the central bank’s monetary policy committee retaining interest rates at a 2009 high of 8.25% since July.

After the MPC’s January 25 meeting, Governor Lesetja Kganyago said while inflation eased during the latter part of 2023, it needs to trend lower to the midpoint of the reserve bank’s 3% to 6% target band, where it prefers to anchor expectations.

“There isn’t a discernible trend that shows that inflation is declining towards our target,” he said. “For as long as there isn’t any sustained decline of inflation towards our target, and more importantly that inflation stays there in a sustained manner, don’t expect us to recalibrate policy.”

Better-than-expected rainfall in South Africa at the end of last year and this month may mean that an anticipated drought from El Niño-induced weather conditions has been averted and could help to keep food inflation in check.