Spending by poor disproportionately impacts food inflation, SARB study finds
A study conducted by the South African Reserve Bank has shown that the money spent by poor South Africans on food has a disproportionate impact on inflation.
The study focused on the relationship between existing grants and prices from 2009 to 2021.
South Africa has the world’s largest social welfare system, providing cash to 30 million South Africans.
According to the National Treasury, the country spends about 3.5% of its gross domestic product on cash transfers, compared with the average spend by other developing countries of 1.5% of GDP.
The SARB study revealed that 55% of the South African population lives below the poverty line, and cash transfers support a large share of the poor population.
Professor Jannie Rossouw, who is attached to the Wits Business School, says an increase in food inflation is largely due to products bought by poor South Africans.
"In short, poor people spend a larger percentage of their income on food than middle-class and wealthy people.
"So if food prices increase at a faster rate, then the average inflation rate in South Africa means that poor people will pay more for the food that they purchase.
"If you want to expand social welfare in South Africa, you must figure out how and where payment will come from, and in SA, it must come from the tax.
"So, the government takes taxes from some members of the society and uses it for social welfare.”
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