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Food price inflation heightening food insecurity

Higher food price inflation deepens the crisis for countries already facing food insecurity and shortages, with poor households feeling the disproportional effects, according to the International Monetary Fund (IMF) which this week said the price of food has steadily increased in sub-Saharan Africa since 2019.

“Food inflation increased throughout 2019, on average, across 20 countries in the region where monthly food price data are available. After remaining stable around 9% (year-on-year) since the beginning of the pandemic, food inflation started to rise again from April this year to some 11% in October,” said Seung Mo Choi, the senior economist working on regional surveillance in the IMF’s African Department.

Choi said the outlook for the continent remains uncertain and that inflated prices could persist if disruptions to the supply chain continue.

“Food accounts for roughly 40% of the region’s consumption basket—a measure of goods and services used to measure consumer price index (CPI) inflation.

“The outlook is highly uncertain. Food inflation and CPI inflation could moderate if commodity prices ease and pandemic-induced global supply chain disruptions resolve.However, high food inflation could persist if inflation expectations become de-anchored or supply chain disruptions continue.

“Regionwide, average inflation is expected to edge up this year before easing next year depending on commodity prices and the resolution of supply-demand mismatches,” he said.

South Africa has also experienced accelerating inflation.

On Wednesday, the country’s statistics agency, Statistics South Africa (Stats SA), reported that annual consumer inflation accelerated to its highest reading since 2017, to 5.5%, up from 5% in October and September.

Statistician General Risenga Maluleke said this is the biggest annual increase since March 2017 when the rate was 6.1% and that the inflation figures are driven mostly by rising transport costs. Just this week, analysts warned that the sharp fuel price hikes seen in the country in November would contribute to a further acceleration in CPI.

Maluleke said the main contributors to the 5,5% annual inflation rate were food and non-alcoholic beverages, housing and utilities, transport, and miscellaneous goods and services.

“The transport category continues to be the major factor behind inflation, recording an annual increase of 15% in November. This makes it the only major group in the inflation basket with an annual rate above the 6% upper limit of the South African Reserve Bank’s monetary policy target range,” said Maluleke.

The statistician general added that the transport category was the only contributor to the monthly increase in the CPI and was the largest factor driving the annual change in the index, contributing 2.1 percentage points to the 5.5% annual inflation rate.

He said: Fuel prices increased by 7.1% between October and November, taking the annual rate to 34.5%. The price of inland 95-octane petrol was R19.54 per litre in November 2021 compared with R14.59 in November 2020.

Adding that public transport tariffs recorded a monthly increase of 1.7% and an annual rise of 8.3%. On average, vehicles are 5.6% more expensive than they were in November 2020.

Research shows that the two biggest levies are the general fuel levy and the Road Accident Fund (RAF) levy. According to Stats SA, the RAF levy has increased by 425% since January 2008, outpacing the general fuel levy, up by 225%, and the basic fuel price up by 19%.

Maluleke said prices for food and non-alcoholic beverages recorded an annual increase of 5.5% and a monthly rise of 0.1%.

“The annual increase is the lowest in 9 months – since February 2021 when the rate was 5.2%,” said Maluleke.

The country’s CPI release report showed that bread and cereal products recorded above average price increases of 0.5% between October and November and that white bread prices increased by 1.2% and brown bread by 1.4% in this period.

According to the report, meat inflation slowed for the third consecutive month, recording an annual rise of 8.5%, down from 10.7% recorded in August 2021.

The report reads that chicken and beef products registered the largest annual increases in November. Price increases for Individual Quick Freezing chicken portions are up 13.7%. Chicken giblets are up 7.7%, beef offal up 14.6% and beef mince up 5.1%.

Another major increase over the last year is the price of oil.

Stats SA reported that oils and fats have been a notable factor behind higher food inflation over the past 12 months.

“The year-on-year increase of 21% in November 2021 is slightly up from the 20.9% recorded in October 2021,” read the report.

On a global scale, the IMF said the recent increase in food inflation is attributed to rising oil prices, “which raise fertiliser prices and transportation costs,” said Choi.

He added that food inflation has also been attributed to droughts and export restrictions imposed by some major food exporters, and stockpiling in some countries.

The IMF said in addition, pandemic containment measures disrupted production and imports of seeds and fertilisers and caused labour shortages during planting seasons also negatively impacting food prices.

Choi said domestic factors such as weather and exchange rates are important contributors to food inflation in sub-Saharan African countries.

Analysts said at 5.5%, with CPI deep into the upper range of the South African Reserve Bank’s 3% to 6% inflation target range, they expect the bank to maintain the tightening cycle it started in November when it hiked the repo rate by 25 basis points.



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