Food shortage in SA not so far-fetched – PnP CEO

South Africa’s rolling blackouts could lead to destabilising food shortages as food retailers battle crippling cost pressures – and government’s silence in response to calls for relief from the industry will make it complicit.

Gareth Ackerman, presenting his annual chair’s address at the release of Pick n Pay’s 2023 financial results, describes the load shedding issue as placing the “entire food industry under existential threat”.

“The probability of social unrest relating to food shortages and possible store closures if blackouts get too high is now heightened,” he says.

“Faced with the reality of structural economic decline, the only meaningful government action seems to be inaction, and to place blame on those trying to help solve the problems.”

Warning signs

Assessment of Pick n Pay’s own shelves indicates that the country may not be too far from a crisis: it is already recording shortages in certain food categories.

CEO Pieter Boone tells Moneyweb the retailer has already started seeing shortages in the supply of basic essential items like maize meal, potatoes, paper – both printing paper and toilet paper – and a risk is also seen for long-life milk.

These shortages are not solely due to the deterioration of local economic conditions, but also to global issues affecting trade partners.

Either way, says Boone, retailers are faced with spiralling operational costs that will soon see the industry unable to shield consumers.

“Unfortunately, we already see shortages in food supply in certain categories given that there is a lack of power supply and also certain countries lack [sufficient] water supply.”

Boone says bread may soon fall onto the shortage list as power and water supply issues affect mills, which then struggle to operate at full capacity and produce the number of loaves demanded by society.

“You’re talking about basic commodity items – that is a severe threat,” he says, “especially going into the winter period when more power is required from the national grid.”

Don’t panic …

Dawie Maree – head of information and marketing at FNB Agribusiness, tells Moneyweb that although load shedding does have an impact on food producers’ operations, consumers should not be concerned about a widespread food shortage just yet.

He says consumers may see localised availability issues for selected food categories because of the impact of load shedding on operations and logistical glitches that may arise, adding that there is a higher risk for meat products as they have greater reliance on continuing cold-chain processes than vegetable and grain products.

“We might find [shortages] in certain products and product ranges – for example, in the broiler industry, where load shedding has an impact on availability because farmers could produce, but due to load shedding the abattoirs couldn’t process the chicken,” he says.

Dramatic price hikes

The latest Household Affordability Index compiled by the Pietermaritzburg Economic Justice & Dignity Group shows that the average cost of a household food basket increased to R5 023.95 in April – R57.75 more than in March.

Compared to the same time last year, the basket price has increased 10.6%.

The index found that numerous food items saw price increases 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%).

Read: Peppers and tomatoes drive up SA’s braai index

Most of the basic food items mentioned above are now subject to investigation by the competition authorities who believe there is reason to investigate their price changes over the past two years.

The Competition Commission, which believes consumers may have been subjected to “unjustified increases”, launched a probe 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.

Read: Competition Commission investigates essential-food prices

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

During its 2023 financial year, Pick n Pay says it saw an incremental cost of load shedding of at least R430 million.

Total trading expenses for the period increased by 11.9% to R20.2 billion, up from R18 billion in 2022, and the retailer has forecast even tougher times ahead for the group and its customers.

Read: Pick n Pay misses dividend estimates as power costs increase

Pick n Pay says it is not confident it can continue to shield consumers from price increases. Its internal price inflation for the period came in at 8.5%, slightly below Statistics SA’s food inflation figure of 10.45% for the comparable period.

“To be frank, this is a call to government to take on leadership and be more decisive – that is something that is lacking at this moment,” says Boone.

To alleviate the pressure on the industry, Boone called on government to take decisive action on Eskom and extend the diesel levy refund to the retail industry after manufacturers of food products were offered the same privilege earlier this year.

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