South Africa CPI cools: Food prices still high

Earlier this week, Statistics South Africa released CPI data which showed inflation easing to 6.8 per cent year-on-year in April. Despite this positive news, food prices in the country remain alarmingly high, posing challenges for consumers. To delve deeper into the factors influencing food price inflation and the outlook for the rest of the year, Wandile Sihlobo, Chief Economist at Agbiz, shared his insights in an interview with CNBC Africa. Sihlobo highlighted that consumer food inflation is expected to remain sticky at relatively higher levels in the near term. This is attributed to various factors such as ongoing global food price inflation, higher expenses incurred by food processors, and interventions like energy substitution. The impact of these factors is likely to keep food prices elevated and inflation persistent for some time. When discussing the breakdown of food inflation between local and imported factors, Sihlobo noted that while South Africa has benefited from good agricultural conditions domestically, external influences such as droughts in South America and increased demand in China have kept commodity prices high. Additionally, the country is a net importer of products like rice, wheat, poultry, and vegetable oils, making it susceptible to currency fluctuations and global price dynamics. The conversation shifted to the impact of the weak rand on food prices, with Sihlobo acknowledging that while global agricultural commodity prices have decreased, currency depreciation has offset potential benefits for South Africa. He emphasized the risks posed by currency fluctuations on products like oils and fats, highlighting the importance of monitoring these developments for future price trends. Despite the current challenges, Sihlobo expressed optimism about the trajectory of food prices for the remainder of the year. He projected a moderation in food price inflation towards the end of the year, expecting it to average lower than the previous year's levels. While acknowledging differing forecasts, Sihlobo remained hopeful that the positive trends in agricultural commodity prices would eventually reflect in consumer prices in South Africa. Looking ahead, Sihlobo addressed the impact of natural factors on food production, particularly mentioning the potential El Nino phenomenon in the upcoming season. While the short-term impact may be mitigated by previous favorable conditions, prolonged droughts could pose significant challenges in the future. He highlighted the importance of monitoring weather forecasts and their implications on agriculture for informed decision-making. In conclusion, Sihlobo's insights shed light on the complex dynamics influencing food price inflation in South Africa. While challenges persist, there are positive indicators that could lead to a more favorable outlook in the second half of the year. As the country navigates both internal and external factors, careful monitoring and proactive measures will be essential in managing food prices and ensuring food security for all South Africans.