January 2020 Household Affordability Index PMBEJD

January Household Affordability Index

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That ‘’Janu-worry’’ has entered the national lexicon is an indication that the household affordability crisis is no longer solely a working-class issue.  More households are struggling to make ends meet and this struggle is getting harder. 

The January 2020 Household Affordability Index shows dramatic spikes in food prices.

· Month-on-month the cost of the household food basket increased by R140,11 (4,4%) to R3 339,98 in January 2020. 

Some of the main drivers of inflation on the household food basket include:  10kg cake flour (up 4% to R75,19), 10kg white sugar (up 4% to R148,79), 5L Cooking oil (up 6% to R93,79), 10kg pocket potatoes (up 15% to R69,98), 2kg beef (up 8% to R161,98), 2 heads of cabbage (up 28% to R31,98), White Bread (up 2% to R10,40 a loaf) and Brown bread (up 3% to R9,60 a loaf).

· Year-on-year the cost of the household food basket increased by R221,70 (7,1%) from R3 118,28 in January 2019 to R3 339,98 in January 2020.

These increases need to be considered against the background of a low wage regime.

  • In January 2020, General workers, earning the NMW of R20/hour experienced a 21,6% deficit in their wages just on transport, electricity and food costs for a family of 4 persons (earning R3 520,00 vs. the R4 488,18 required for transport, electricity and food).
  • Year-on-year: the cost of the 3 core expenses critical for worker productivity (transport, electricity and food) increased by 6% from R4 233,79 in January 2019 to R4 488,18 in January 2020.
  • In January 2020 the NMW rate per hour would have to increase by 27,5% or R5,50 (from R20 an hour to R25,50 an hour) just to allow a worker to cover her/his expenses of transport to get to work and back, prepaid electricity and food.
  • In January 2020, Domestic Workers, earning the NMW of R15/hour experienced a 41,18% deficit in their wages just on transport, electricity and food costs (earning R2 640,00 vs. the R4 488,18 required for transport, electricity and food).
  • In January 2020 the NMW rate would have to increase by 70% or R10,50 (from R15 an hour to R25,50 an hour) just to allow a Domestic Worker to cover her expenses of transport to get to work and back, prepaid electricity and food.

Low baseline-wages are not enough to ensure that workers and their families are able to cover even their monthly food costs.

 

  • In January 2020 a general worker earning the National Minimum Wage and working for a full 22 days will earn R3 520 per month.  In Pietermaritzburg, transport for a worker to get to and from work costs R1 232,00 (35% of the wage) and electricity for a small household cost R598,52 (17% of the wage).  Together transport and electricity charges take up 52% (R1 830,52) of the National Minimum Wage, leaving R1 689,48 for all other expenses (including food). 
  • In January 2020 the cost of a basic nutritional basket of food for a family of four was R2 657,66. 

 

This situation could get dramatically worse should Eskom be granted a further 17% tariff hike; and if VAT is increased in the next budget, as predicted by many economists; and if the National Minimum Wage level is not raised to cover actual costs of worker expenses.

Earlier this month the Reserve Bank cut the repo rate by 25 basis points to provide some form of relief to consumers. 

While this is welcome, this has come a bit late and is too small to make a substantial difference.  Further cuts in the repo rate would be necessary because more and more of the middle-class are now joining the working-class in the queue to take on debt for monthly consumption expenses:  to put food on the table, put petrol in the car, keep the lights on and children in school. 

However, millions of South African households are in a worse position and remain unaffected by the drop in the repo rate because they do not access credit through the formal banking system but through some variation of a loan shark.  For them there has been no relief.

This is not a good place to be.  There is very little government intervention offering poor and working-class households, affordability relief.  Households living in this world cover expense shortfalls by cutting back on food and going deeper into debt via some variation of a loan shark.  This is not a sustainable strategy for South Africa.

For more information or media enquiries please contact Mervyn Abrahams on 079 398 9384 or at mervyn@pmbejd.org.za

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