Pensioners will have little cause to celebrate the government’s announcement this week that it will increase their monthly grants in an effort to alleviate the effect of high food prices on the lives of the poor.
The short-term measures introduced will allow rural people to buy a 12,5kg bag of maize at nearly half-price in terms of a deal struck by the government and the private sector.
The government was forced to intervene when food prices rose by about 20%, with maize estimated to have soared by as much as 50%.
Minister of Agriculture and Land Affairs Thoko Didiza said the main cause of the rise was the rapid depreciation of the rand, escalating oil prices, regional food shortages and lack of competition in the supply chain beyond the farm.
The Congress of South African Trade Unions (Cosatu) welcomed the short-term measures, but criticised the government for not instituting more stringent reforms with regard to price controls.
The short-term measures include welfare grants being raised to improve the purchasing power of poor people.
Pensions will increase from R620 to R640; the child support grant by R10 from R130 to R140; the grant aid from R120 to R130; foster care grant from R450 to R460; and care dependency from R620 to R640. This intervention also aims to intensify the campaign to register all citizens who are eligible for social security grants.
The cheaper maize, called Yiyo Lena (this is the one), is intended to go directly to the poor at a lower price. The 12,5kg bags of maize will reach stores in a few weeks and will cost R25,99 compared to the current R46. This was done with the assistance of companies such as Premier Foods and Metro Cash & Carry, who have agreed to carry the cost of the reduction until after Christmas.
But the government warned that consumers should not stock up on the maize as this would create a false perception of demand.
Tariffs and transparency of the food production and supply chain will be investigated as a long-term measure.
“Tariff regulations already in existence, which come into effect within particular domestic price ranges, will be applied more effectively and expeditiously,” said Didiza.
The government has committed itself to setting up a monitoring mechanism committee to ensure debate about retail prices. The Competitions Commission will investigate any price collusion along the food supply chain.
Didiza said the government would investigate the effect of VAT-exempt basic foods to see whether relief was passed on to consumers.
Cosatu says it is disappointed in the government for not introducing reforms to prevent the exercise of market power to hold up prices.
“The fact that one major retail chain — Pick ‘n Pay — has increased its profits by close to 50% is a chilling indicator of the extent of profiteering off our people’s miseries. In this context, as a minimum, government should establish more effective early warning mechanisms, and introduce measures such as a high tax on ‘windfall’ profits to prevent speculation in basic foods,” says Cosatu spokesperson Vukani Mde.
He says subsidised prices for the poor place the burden of subsidisation on the taxpayer, and ignores the profiteers, who are mostly responsible for the high food price.
Cosatu plans to take action against food traders and to picket retail outlets across the country to express its dissatisfaction with the present food price situation.
But Didiza says that the government will not go back to price control. The government has called on the private sector to join it in finding solutions to these food hikes.
“It is not only government’s challenge,” says Didiza. “The effectiveness of these interventions, and the success of society’s efforts against high food prices will depend on all of us lending a hand.”
Additional reporting by Ramses Gabrielse