Some foods now cheaper than before VAT hike

Despite the government raising the value added tax (VAT) from 14% to 15% in April, some foods – including oil‚ bread‚ fruit and sugar – are cheaper than they were a year ago.

“A closer look at the data suggests that much larger forces than VAT are at play [like] tough economic conditions and the recovery from drought.

“A sluggish economy has constrained consumer spending‚” Statistics SA said in analysis published this week.

Stats SA looked at the latest Consumer Price Index (CPI) and found that bread and cereal were 3.1% cheaper in June than in 2017‚ while fruit prices dropped by 3.2%.

“The average price for a loaf of brown bread was R12.24 in June 2017‚ falling to R11.53 in June 2018‚” it said.

It is not all good news‚ though.

Meat‚ fish‚ dairy and vegetables became more expensive.

You would have paid‚ on average‚ R47.37 for a kilogram of hake in June compared with R41.09 in 2017. Overall‚ the basket of food that is used to measure the CPI would have been 0.1% cheaper in June compared with April when VAT was raised.

Stats SA said the country was emerging from one of its worst droughts‚ which led to a rise in food inflation in 2016.

“The years 2015 and 2016 were particularly bad‚ with 2015 the driest year on record since 1904 when rainfall measurements began.”

According to the South African Grain Information Service, there was a 45% drop in maize production in 2015/16 compared with 2013/14.

Stats SA said: “Agriculture began to find its feet again in 2017‚ contributing to a slowdown in food inflation.

“The grain industry bounced back relatively quickly‚ recording its most successful commercial maize season ever in 2016/17.”

Stats SA pointed out that bread and cereal inflation slowed down quicker than meat prices‚ because it took longer for production to recover.