FOOD prices jumped 14% in the year to March, posing a crisis for poor South Africans who spent more than half their income on food, the Congress of South African Trade Unions (Cosatu) has found.
Cosatu’s Neva Makgetla, Katishi Masemola of the Food and Allied Workers’ Union and Eric Watkinson of Cosatu’s research arm, the National Labour and Economic Development Institute, challenge the idea that the rand’s crash is the main cause, blaming speculative pricing and deregulation of production and marketing. ”We don’t need to import staple foods this year and farmers neither use a lot of imported inputs nor pay diesel levies.”
They call for an urgent investigation into pricing practices in maize, wheat, dairy, meat and other food production and retailing, leading to proposals on how to ensure more stable and less speculative pricing. They also call for a food price and jobs summit by the end of this year.
The researchers say food prices have far outstripped those of other goods and services, which rose just more than 5% in the year to March. The cost of maize meal doubled in just eight months and the price of bread increased sharply in March.
”The cost of living for those earning R1 000 to R2 500 a month rose 9%, while for the very poor it climbed 10%. For the very high-income group, it rose only 6%. The increase for the poorest more than wiped out the gains from this year’s improvement in old-age pensions.”
Supporting their argument that speculation is at fault, the researchers say last year’s white maize crop of four million tonnes more than covered South Africa’s needs. ”However, speculation about the size of maize exports to the Southern African region raised South African Futures Exchange prices to unprecedented levels.”
They suggest that underestimates of the domestic maize crop lead to an artificial increase in the price.
In a context where the National Chamber of Milling indicated that every 1% underestimation of the crop meant a 0,7% increase in the maize price, estimates by the National Crop Estimate Committee started off 10% too low in 2000/ 2001.
”It is not clear why the maize crop is almost always underestimated. Now that the latest 2001/ 2002 crop estimates show an above-average harvest [at five million tonnes], when will the poor see a significant maize meal price drop?”
The researchers point to a widespread failure in passing on VAT relief. ”In most shops brown bread, which is VAT-exempt, costs almost as much as white bread. It should cost 14% less.”
They say the rapid deregulation of food production in the past 10 years has led to lower investment, stagnant production, more concentrated ownership, inefficient retail systems and a deterioration of food-quality regulation.
Reduced weight of loaves doubled the real price per gram of bread between 1990 and 2002. Since the mid-1990s agricultural investment had plummeted by more than a third and production had remained more or less stable, while agricultural employment had dropped ”precipitously”.
”High prices for farm products have not translated into employment protection, decent wages or conditions for workers in food production.”
Associated with deregulation was the growing concentration in commercial farming as smaller farmers went under, Cosatu says. Large producers were well organised in most sub-sectors, notably wheat and maize. Supermarket chains were also highly concentrated. At the same time poor communities still relied on micro-traders, who levied high mark-ups.
The researchers say these trends reflect an emphasis on free markets and exports at the cost of food security. They call for extended nutrition schemes for schoolchildren and other vulnerable groups ”either through direct provision of food or food-stamp programmes”.
They urge more effective welfare grants, with increases tied to the inflation rate for the poor, not the overall consumer price index.