Statistics SA has recently released information on coming changes to the basket of goods, which provide the weights of shares applied to individual prices of consumer goods, for the forthcoming base change for the Consumer Price Index and its derived price indices.

Statistics South Africa released a discussion document which proposes the set of products and services that will comprise the CPI in future. These proposals form part of the ongoing review and improvement of official statistics in South Africa. The list of proposed products is based on research conducted by the organisation on what South African households typically spend their money on.

The main reasons for the proposed change includes

• To make the CPI basket more representative of the experiences of the majority of South Africans. This is reinforced by a new methodology used by Stats SA to decide which products and services should make up the CPI basket.
• Dying technologies (such as VHS and audio tapes) being replaced by those technologies that have established themselves as the standard (CD’s and DVD’s). The increasing penetration of Information technology is evidenced by the inclusion of ISP fees and computers (laptops).

Methodological improvements have also brought about changes in the composition of the basket. Stats SA proposes the inclusion of certain products for the first time.

In keeping with the reasons given, the following changes have been proposed including

• Minibus taxis, which account for over 60% of public transport. Collection of these prices is now possible as a result of the establishment of a national team of price collectors for CPI;
• Funeral costs and funeral insurance enter the basket as expenditure on these items increases;
• Restaurants, take-aways and hotels, now appear as a distinct category in the new CPI classification and Stats SA proposes to publish their price change explicitly;
• Internet service provider fees and laptops enter the basket as this technology becomes more pervasive;
• DVD and CD players and disks replace VHS and audio tapes and players as a result of changes in technology;
• Tickets to sporting events are added to the entertainment basket; and
• The lottery will be included in the basket if it is operational on 1 January 2008.

Stats SA employed two criteria to select products and services for the CPI basket. These are the total expenditure on an item, and the number of households which purchased the product. The combination of these two approaches serves to exclude any luxury items that may record high expenditure because they are expensive, but are bought exclusively by a small minority of households.

Also for the first time, Stats SA has derived a basket for each province. This was achieved by applying the selection criteria on a province by province basis, rather than for the country as a whole. This change makes the CPI more responsive to the different purchasing behaviour of consumers in different provinces.

As a result of these changes, the total number of products in the national CPI basket drops from the current 1124 to 386 (excluding health items which will be added later). A total of 389 products disappear because of methodological changes, while 349 have dropped from the basket because they did not meet the criteria. The total of 386 is well within the range of products appearing in the CPIs of other countries around the world.

The January 2009 CPI (published in February 2009) will be the first to be published on the basis of the new basket and weights.