Tag: food

Poor families starved by the price of food

By Sizwe Sama Yende for News24

Poor families have been cutting down on buying proper nutritious food by as much as 26%, and need another R1 062.38 a month to be able to afford it.

The August 2018 Household Affordability Index was compiled by NGO the Pietermaritzburg Economic Justice and Dignity Group. It is in response to the government-commissioned panel of experts’ report on VAT, released last week, in which additional items were recommended for zero-rating. Currently, 19 items are zero-rated for VAT.

The Pietermaritzburg organisation warns that families can no longer afford to eat properly and that no amount of “tinkering around the edges of our economic framework” is going to change this.

It wants all VAT charges to be removed from food in light of the price hikes that have occurred since government increased VAT from 14% to 15% in April.

“If there is a need to recover revenue from food, then it is better if it be recovered off luxury foods, which working class households do not buy and the wealthy do buy,” the organisation’s report found.

“Food is not a commodity. It is better for all of us if we are all able to eat properly and be healthy. Without proper nutrition none of our developmental outcomes will come to fruition. Our education outcomes will continue to be dire, our health sector will continue to collapse as more and more people get sick and – with very little money in the pockets of the majority of South Africans, and child stunting levels at 25% for girl children and at 30% for boy children under the age of five years – we can have no future workforce or political stability, or reasonable economic recovery.”

The VAT panel released its report to Finance Minister Nhlanhla Nene on August 6. It recommended zero-rating white bread, bread flour, cake flour, sanitary products, school uniforms and nappies, including cloth and adult nappies.

The panel also recommended that government should expedite the provision of sanitary products to the poor and ensure that zero-rating did not benefit producers, but rather, accrued to consumers.

Other options

Julie Smith, a researcher at the Pietermaritzburg Economic Justice and Dignity Group, said the country faced a crisis of affordability and suggested options that could be explored if VAT remained the same.

“We are saying government must remove VAT completely. However, there are a number of options that should be looked into. The income levels are too low because of the legacy of apartheid and workers must be paid a living wage. The government can also look into how it can increase the old-age and child social grants,” she said.

“Another option is that government should look into how it reduces the cost of goods and services. Transport to work takes a huge percentage of household incomes. Can we have a way of reducing fuel prices and have a public transport system? In South Africa, transport is privately owned.”

The ever-increasing cost of electricity, said Smith, also had a direct impact on poor households. Zero-rated foods still had to be cooked. “Unless the cost of electricity is looked into, people may have food but they cannot cook because they cannot afford electricity.”

Families need R1 062.38 more a month to be able to afford nutritious food.

The index shows that the cost of foods in the household food basket, a basket designed with women living on low incomes, was R3 009.65. But the median wage for black South African households is R3 000.

The difference in cost between the foods which families living on low incomes try to buy each month, and the foods which families would like to buy and should buy to meet their basic nutritional needs, amounts to R1 062.38.

The food that families need to buy to meet basic nutrition costs R4 072.38 a month.

The situation is worse for families surviving on the R400 monthly child support grant because it is below the poverty line of R531 per person per month. Also, the child support grant is below the cost of a nutritious diet for a child aged between 10 and 13, which is R569.98.

VAT on the household food basket in August, the index found, was R215.77 – or 7.2% of the total household food basket.

“If white bread and cake flour are zero-rated in line with the panel’s recommendations, the savings on the household food basket would be R40.81 a month (R31.46 on 25 loaves of bread and R9.35 on 10kg of cake flour),” the report found.

“This would bring the cost of the household food basket down to R2 968.84 a month. This amount is almost equivalent to the median wage for a black South African household, and this is just food – not transport or any other critical household expenses.”
Removing VAT from peanut butter, an excellent source of protein and fats on children’s sandwiches, the organisation argues, is not going to send the economy into the ashes.

Neither will subsidising eggs, maas, brown bread and maize meal.

Nor will regulating the retailers and the prices on supermarket shelves.

“We are facing probably our greatest crisis, and we are still unable to conceptualise the problem within the broader political economy and deal with its cause. We cannot deal with our food affordability crisis by limiting analyses to losses to the fiscus and evaluating a few chosen goods and services within such a narrow framework of evaluation,” the report found.

“It is not useful to approach problems in isolation or by using the entry point of analysis as ‘whether we can afford this’ or ‘what will the loss to the fiscus be for us?’.”

Pick n Pay to offer food on credit

Debt counsellors are warning consumers against buying food on credit, saying that it will have a negative impact on overall debt.

Pick n Pay is the latest store to offer customers the option of purchasing groceries on credit.

The supermarket says that it will use its Smart Shopper card programme to select shoppers who qualify.

Pick n Pay deputy CEO Richard van Rensburg says that the store accounts have been designed to exclude hidden fees that exacerbate the cost of credit and charge the lowest monthly fee of R10.

However, Debt Rescue CEO Neil Roets says that it is better to buy assets on credit than food.

“Food is something that you definitely should not buy on credit. Good debt is having a home loan or a car. But if you have to finance food, then you are in big trouble.”

Debt counsellor Deborah Solomon says that it’s not advisable for shoppers to buy food on credit due to the interest charged on them.

“Food is a necessary living expense which you need to be able to have access to and it’s not wise to spend credit on food, especially when you can’t afford to pay that credit off in its full capacity at the end of the month.”

By Koketšo Motau for EWN

In light of rising food prices following the nationwide drought and weakened value of the rand, employers can expect additional pressure from employees for annual salary increases. Many employees are desperate for an increase in order to make ends meet; however, the challenging economic climate makes it difficult for employers to provide an annual raise to their entire staff. Employers must therefore approach the situation very strategically.

This is according to Francois Wilbers, MD of Work Dynamics – a leading organisational psychologist consultancy in the country, who says that often the workforce doesn’t realise that employers are exposed to exactly the same circumstances and are also battling to keep a steady revenue stream. “Granted, in larger corporations, the extent to which they are exposed is less than in smaller organisations, as smaller establishments experience the economic changes with far more severe financial consequences.”

Wilbers says that it is important to note that salary increases are not regulated by labour legislation, except in as far as may be provided for in any agreement or collective agreement, where provision is usually made for annual wage or salary negotiations. “Essentially, in the absence of any such agreement, salary increases remain a matter of mutual interest between employer and employee, therefore, there is no obligation on the employer to grant annual increases. With that said, if any party in a relationship finds it necessary to refer to the ‘terms of a contract’ as a point of departure in engaging with each other, it says something about the nature of trust between the parties.”

Wilbers adds that in cases where employers cannot afford to pay an increase equal to the consumer price index (CPI), they need to be honest with their staff members and accept the premise of them seeking alternative employment. “It is absolutely essential to maintain an open dialogue rooted in transparency and honesty in order to handle the situation effectively. For example, don’t use the detrimental state of the economy as an excuse to not grant your employees annual increases if you are still increasing profitability.”

When trying to asses the best option for your organisation, the retrenchment of staff members is a pressing threat that must be avoided at all costs, he explains. “For organisations in financial distress one of the most common ways to solve the problem is to retrench staff. From a socio-economic point of view, employers should try to avoid retrenchments and rather think of more creative alternatives. This option is especially less desirable in our country, as our unemployment rate of 25% is of the highest in the world.

“In addition to the socio-economic impact of retrenching staff, the effects on employee morale can be devastating, especially if the process is not handled in a professional and transparent manner. First prize is to avoid retrenching staff altogether.”

Wilbers explains that there are a number of alternatives that can be implemented to avoid the process of retrenchment and that these could end up being a mutually beneficial solution. “One of the most common steps organisations take is to forfeit guaranteed year-end bonuses and to rather assign bonuses according to targets that are achieved.

This incentive system is a great tool for maintaining committed and hardworking employees, while weeding out those that are not target driven, says Wilbers “In extreme cases, organisations can also implement salary cuts rather than retrenchment. “Again the key here is mutual honesty between employer and employee. The employer could for example allow the employee to take on freelance opportunities in order to supplement his or her decreased salary.”

Wilbers continues that other tried and trusted alternatives to retain staff is to implement annual increases subject to affordability, on a ‘pay-as-you-go’ basis. “Here you would have to decide whether you can actually afford the increase. You would have to look at the company’s performance over the first quarter and then see whether you can afford to pay an increase for that quarter. Increase will be paid in the form of a cash amount for the first quarter or spread equally over the second quarter.”

Some orgnisations opt for a performance-based pay on top of current salaries. “In exchange for sacrificing annual increases, staff will be offered the opportunity to earn incentives if targets are achieved. These targets must be set in such a way that there will actually be enough money available to fund the incentives.”

Another effective way would be to pay certain allowances to key staff – despite the difficult economic times – is for companies to keep in mind that they still have to compete for talent, explains Wilbers. “If you are afraid you may lose some of your key staff, consider paying them an allowance to retain their services, without giving an annual increase to other staff.”

“Ultimately, organisations differ in their ability to sustain staff and afford salary increases. Retrenchments in harsh economic conditions should always be avoided. The key is to seek solutions that will be of mutual interest to the employer and employee and engage in a proactive and honest way to find creative solutions,” concluded Wilbers.

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