The frequent power cuts in South Africa could result in severe food shortages, causing instability, as grocery stores struggle with soaring expenses. The government’s lack of response to the food industry’s plea for relief may implicate it in the crisis.
During the presentation of Pick n Pay’s 2023 financial outcomes, Gareth Ackerman expressed concern in his annual address as the chairman. He referred to the electricity supply problem as a danger to the “whole food industry’s existence.”
Ackerman warns of the increased likelihood of public unrest due to food scarcity and possible store closures as a result of escalating blackouts.
He observes that the government appears to be taking no meaningful action to address the country’s economic challenges and instead faults those working to alleviate the crisis.
According to Pieter Boone, CEO of Pick n Pay, an assessment of the retailer’s shelves indicates that the UK may be heading towards a crisis, as there are already shortages in certain food categories. Basic essential items such as maize meal, potatoes, printing paper, toilet paper and long-life milk are currently in short supply, due to a combination of local economic conditions and global issues affecting trade partners.
Boone warns that spiralling operational costs will soon make it difficult for retailers to shield consumers from further shortages. With a lack of power and water supply, there is a risk that bread will also soon be in short supply as mills struggle to operate at full capacity and meet demand.
These basic commodity items are critical for society and the threat of shortages is severe, especially as the UK heads into the winter period when more power is required from the national grid. Retailers and consumers need to be aware of the potential risks and take necessary measures to ensure adequate supply and demand.
Don’t panic …
Stay calm. Despite the impact of load shedding on food producers’ operations, Dawie Maree, Head of Information and Marketing at FNB Agribusiness, reassures consumers in the UK that there is no need to worry about a widespread food shortage at this stage.
Consumers may experience localised availability issues for some food categories due to the operational and logistical difficulties that load shedding can cause. Meat products are at a higher risk of shortage since they rely heavily on continuous cold-chain processes, in contrast to vegetable and grain products.
Maree warns that we may experience shortages in specific products and ranges, such as the broiler industry, where load shedding affects availability. The farmers might have produced enough chicken, but the abattoirs can’t process them due to load shedding.
Dramatic price hikes
According to the Pietermaritzburg Economic Justice & Dignity Group’s latest Household Affordability Index, the average cost of a household food basket surged to £240.28 in April, an increase of £2.76 from March. Compared to the same period last year, the basket price surged by 10.6%.
The index highlights that several food items experienced price hikes in April, including green peppers (16%), onions (11%), spinach (11%), tomatoes (8%), cabbage (8%), maas (5%), canned beans (5%), maize meal (3%), rice (2%), cake flour (3%), eggs (3%), full cream milk (2%) and brown bread (2%).
The Competition Commission has started investigating the price changes of most of the basic food items mentioned above over the past two years. The commission suspects that consumers may have been exposed to unjustified price increases and launched a probe into the matter in March.
Shifting blame ahead of the elections
For Pick n Pay, however, the competition authorities’ decision to investigate retailers comes down to nothing more than a blame-shifting exercise ahead of the 2024 national elections.
“We are concerned that the government is attempting to shift the blame for high food inflation from itself – as a consequence of load shedding – to us as the retail industry,” it says.
Maree believes the likelihood of the competition authorities making adverse findings against retailers is low, but says it remains important for the body to keep its finger on the pulse to ensure that all industry players stay in line.
There will always be a role for the Competition Commission to play in making sure retailers toe the line, he says. “We have seen that in other industries as well – we have to make sure they don’t step out of line and [become] anti-competitive.”
He adds: “I don’t suspect they will find anything. I think retailers absorb a lot of cost increases in the supply chain which they don’t transfer to the consumer in the end … I don’t think the Competition Commission will find any misdoing from the retailers.”
The high cost of load shedding
Pick n Pay has reported an additional cost of at least R430 million due to load shedding during its 2023 financial year. As a result, the retailer’s total trading expenses for the period rose by 11.9% to R20.2 billion. The company has warned of even tougher times ahead for both itself and its customers, and it is not confident it can continue shielding consumers from price increases. Pick n Pay’s internal price inflation for the period was 8.5%, slightly below Statistics SA’s food inflation figure of 10.45%.
Boone, a representative of the company, has urged the government to take decisive action on Eskom and extend the diesel levy refund to the retail industry, similar to what manufacturers of food products were granted earlier this year. Boone believes that this would alleviate the pressure on the industry and help Pick n Pay and its customers cope with the situation.