SIYABULELA MAKUNGA | Dialogue needed to urgently address SA's cost-of-living crisis

The shrinking buying power of low-income households inevitably calls for a national dialogue on the need for structural and regulatory reforms to urgently address the prevailing pandemic of the rocketing cost of living in SA.

This statement is triggered by the bleak picture painted by the inaugural Cost of Living (COL) report recently published by the Competition Commission – a must-read for every South African.

The urgent reforms should immediately seek to address the economic crisis of rocketing prices of essential food items and household services.

To achieve this, there needs to be a concerted effort across all government departments, and captains of industry and regulators.

Reports such as the Essential Food Price Monitoring (EFPM) and COL seek to establish if markets are working well while encouraging greater transparency throughout the value chain in terms of price transmission.

It is our strong view that when markets don’t work well, we can look at how to improve them, while transparency often helps markets work better if opportunistic behaviour is exposed.

In July 2020, the commission published its inaugural EFPM report, which systematically observed and tracked the prices of selected essential food items across their entire value chain from farm production to retail outlets.

The primary objective of the EFPM report was to monitor price movements for staple food items to identify market inefficiencies, analysing pricing dynamics at each stage of the value chain, and ensuring transparency in price transmission between producers, processors and retailers.

The commission has now expanded the scope of its price monitoring framework, restructuring the EFPM report into the COL report. The report includes items beyond essential food to capture a more inclusive and representative view of household economic realities. This enhanced report retains its focus on essential food items and also incorporates additional key non-food items that affect the cost of living for households.

These include electricity, water supply, rentals for housing, primary healthcare services, minibus taxi fares and petrol, funeral policies, education and internet usage costs.

The COL report aims to provide essential insights into the affordability of basic goods and services, allowing individuals and households to assess their financial capacity to sustain a reasonable standard of living.

While the prices of some of the items in the COL report are set or influenced by the government, such as electricity and water supply, it is important to understand the effect of rising costs for these services on households’ budgets, particularly low-income households.

By identifying and understanding the key underlying drivers of the current cost-of-living crisis, we are able to determine where anti-competitive conduct may be worsening the cost of these essentials.

According to the Consumer Price Index categories of expenditure, the lowest income households spend up to 40.71% on food and nonalcoholic beverages, followed by 26.1% on housing and utilities, while they spend 66.81% on necessities such as transport, insurance, financial services, health and education.

Regrettably, the report shows that “a recent Household Affordability Index report revealed that the average South African worker spends over 57% of their monthly earnings on transport and electricity, a figure that leaves little room for food and other essential expenses.

“Furthermore, aggressive interest rate hikes have compounded the problem, adding considerable amounts to monthly repayments on home loans and other forms of credit.

“Given that wages have failed to keep pace with the rising costs, the strain on household budgets is a real concern.”

Some of the key observations of the COL report highlighted that: the price of electricity increased by 68% and water prices went up by 50%, which is a much higher rate than general inflation, which increased by 28%; the cost of general practitioner services in 2025 is substantially higher than increases in previous years. This is concerning as only 16% of the population is covered by a medical scheme; minibus taxi fares generally tend to increase only when there is a major spike in petrol prices. However, once prices are increased, they are permanent and are not reversed once petrol prices decrease later.

Also, the cost of funeral policies remains significantly below overall inflation, and this is encouraging given the importance of funeral policies among low-income households; primary education inflation increased by 37% while secondary education inflation increased by 42%, both outpacing overall headline inflation (28%); and internet usage costs for both wired and wireless connections remain below general inflation. The cost of mobile data decreased after the commission’s Data Services Market Inquiry in 2019 and has remained stable since then.

* Makunga is spokesperson for the Competition Commission of SA