In recent years inflation has risen to concerning levels in many economies. Its rise hinders economic growth and affects consumer choice, significantly impacting the food and consumer sector and contributing to food insecurity here and in many other countries.
For example, US inflation reached a 40- year high in 2022, with goods and services’ prices increasing at an alarming rate. Rising inflation was triggered by the pandemic and related disruptions to supply chains, production processes and global trade. Many economies have struggled to cope with demand and supply chain disruptions, leading to higher prices for basic goods and services.
The situation in South Africa is worsened by the volatile rand, which has been affected by global economic conditions and local political uncertainty. Additionally, the power crisis has severely affected food security as it has disrupted farming operations and reduced the quality of produce, several reports say.
While rising inflation is a global issue, the impact is felt more acutely in emerging markets, particularly in Africa, due to factors unique to their economic and political situations. According to the latest data from Statistics South Africa, the country’s inflation rate stood at 7,1% in March, with food and non-alcoholic beverages increasing by 14% year on year.
The food and consumer sector is particularly vulnerable to inflation as it directly impacts the purchasing power of households and their ability to afford basic goods. As such, policymakers must take decisive action to address the root causes thereof and support vulnerable sectors to ensure basic needs are met and social stability is maintained.
The food price index has increased steadily in recent years. Data from the UN’s Food and Agriculture Organisation suggest South Africa’s rose by 9.5% in 2021, compared with the previous year. This rise in prices is due to a range of factors, including higher transport costs, increased demand and supply chain disruptions caused by the pandemic.
As a result of the global rise in food inflation, consumers worldwide are re-evaluating their purchasing decisions and making tough choices when it comes to household budgets.
In many cases they are opting for cheaper products, particularly in the food and beverage sector, and cutting back on discretionary spending. They are also more likely to switch to private-label or generic products to save money. Consumers are also adding new, value-based solutions to their shopping baskets. For example, there is a growing trend towards plant-based alternatives as a cheaper, often healthier alternative to meat-based products.
Overall, the rise in food inflation is leading to a shift in behaviour, with consumers seeking solutions that offer the best value for the money. Consumers do have access to nutritious food, but may not necessarily have the knowledge, skills or tools to make healthy choices. This is where the industry can play a role by providing accessible and affordable nutrition solutions. For example, food manufacturers can produce fortified foods that provide essential nutrients at an affordable cost, while retailers can offer promotions on healthy food options to make them more accessible to those on a budget.
Additionally, education and awareness campaigns can help consumers make more informed choices about food and nutrition. By working together, the food industry and other stakeholders can help mitigate the impact of rising inflation on food security and ensure all consumers have access to nutritious food. In East and Southern Africa there are ongoing efforts to address food insecurity, including programmes aimed at supporting smallholder farmers, expanding food gardens in schools and communities, and introducing food voucher systems for vulnerable households.
The food and consumer sector can contribute to these initiatives by introducing more affordable product lines to cater to price-sensitive consumers and implement new, direct-to-consumer models to improve supply chain efficiency and reduce the cost of food. Examples are Nestlé’s partnership with the Kenyan government and dairy industry to promote dairy farming and help smallscale farmers increase milk production and income. There are also initiatives to improve the livelihoods of coffee and cocoa farmers, while promoting sustainable farming practices and managing inflation through savings initiatives.
In 2020, Nestlé launched a range of affordable, fortified products in East and Southern Africa to address malnutrition by providing essential nutrients to consumers at an affordable price point.
Despite these challenges, Deloitte’s “South Africa economic outlook: April 2023” notes there are significant opportunities for growth and development in Africa, particularly in technology, renewable energy and agribusiness. By capitalising on these and addressing underlying structural challenges, African countries can achieve sustained economic growth and reduce food insecurity in the long term.
Contact:
Nestlé East and Southern African Region (ESAR)
Mota Mota
Head: External Communications
Tel: +27 72 206 9015
Email: [email protected]
About Nestlé
Nestlé is the world’s largest food and beverage company. It is present in 187 countries around the world, and its 291,000 employees are committed to Nestlé’s purpose of unlocking the power of food to enhance quality for everyone, today and for generations to come. Nestlé offers a wide portfolio of products and services for people and their pets throughout their lives. Its more than 2,000 brands range from global icons like Nescafé or Nespresso to local favourites like Ricoffy. Company performance is driven by its Nutrition, Health, and Wellness strategy. Nestlé is based in the Swiss town of Vevey where it was founded more than 150 years ago.