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The price of a traditional South African barbecue rose at a slower pace for a second straight month, suggesting that food costs may cool further before the El Niño weather phenomenon scuppers the downward trend.
Bloomberg’s Shisa Nyama Index, an early indicator of where food inflation may be heading, shows the average price of a backyard braai rose 1.3% in March from a year earlier, compared with 2.5% in the prior month. Official food inflation slowed for a third straight month in February to 6% and headline price growth quickened to 5.6%. Onion, cooking oil, carrots, and corn meal prices were the biggest contributors to the decline in the index.
Still, the drop in the gauge may be short-lived. Central bank Governor Lesetja Kganyago said at a monetary policy committee briefing on Wednesday that South Africa is “at a difficult juncture” regarding food prices. Hot and dry weather caused by El Niño may lead food inflation to pick up again, he said.
The dry spell that’s persisted across much of the country this year led the government’s Crop Estimates Committee on Tuesday to cut its outlook for the white corn harvest by 11% to 6.28 million tons, while the overall take that includes the yellow variety is projected at a five-year low of 13.3 million tons. The revised forecasts may mean South Africa will need to import significant amounts of white corn, used to make a staple food, for the first time since 2017.
The central bank’s models show severe drought conditions could add 10 to 28 percentage points to food inflation.
“It looks like the risk to the crops could materialise more than what we thought of last year,” Kganyago said. And as we have seen in the past, that poses a risk to food inflation and complicates the disinflation process, he said.
Kganyago reaffirmed Wednesday after the MPC maintained its benchmark rate at a 15-year high of 8.25% for a fifth meeting in a row that it will only cut rates when it is confident that inflation is on a sustainable path toward the midpoint of its 3% to 6% target range, where it prefers to anchor expectations.
The Shisa Nyama Index crunches data from the Pietermaritzburg Economic Justice and Dignity group of 14 key ingredients in barbecues — known locally as a braai — consumed in South African townships. The ingredients include beef, wors, maize meal, onions and oil (which both saw large price drops), tomatoes and potatoes.
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.
