Food prices are continually on the rise, slowly but relentlessly, affecting everyone, especially the poor, whether they live in rural areas or cities. When the news media publish articles about food prices and surveys, everyone tends to look at food manufacturers and retailers. But one has to look a lot deeper than that to understand the causes of rising food prices. We won’t go into the causes of poverty, because that has very much to do with a government that has ruled for thirty years and made very little inroad into improving the lives of millions of people, and that requires a different type of analysis. Instead, let’s look at the reasons for rising food prices and the costs surrounding them.
If you look at it, you’ll see that the state is a major contributor to rising food prices. The government struggles to keep petroleum prices down while collecting substantial revenue from fuel taxes and levies. Then there is electricity, which has become extraordinarily expensive, despite the fact that South Africa once enjoyed some of the lowest electricity prices in the world. Remember that petrol and electricity are inputs into agriculture, manufacturing, food processing and distribution, so when their costs rise, the increases work their way through the entire supply chain, from the farmer preparing the land and harvesting the crop to the factory processing the food and the retailer putting it on the shelf; farmers are often blamed for rising food prices, but they too have had to contend with higher input costs, while the state has presided over the deterioration of transport infrastructure, ports and railways, adding further costs and inefficiencies to the movement of goods around the country. One cannot look at food prices in isolation. No one can.
Rising labour costs also contribute to food prices. This is a touchy subject, because wages and employment conditions are protected by the state and organised labour, but in a developing country such as South Africa, there is another side to the argument: when minimum wage requirements and other employment costs make it too expensive for businesses to employ additional workers, those who already have jobs may be protected while others are excluded from the opportunity to find employment, leaving more people dependent on social grants or family members to survive. The challenge is to find a balance between protecting workers from exploitation and ensuring that businesses can afford to employ more people, because higher wages for some do not necessarily translate into better living conditions for everyone.
The private sector, meanwhile, has to remain competitive. This is why retailers are sourcing products from international markets in an effort to keep prices down. Some imported products may be inferior to locally manufactured alternatives, but they are cheaper, which makes them attractive to consumers struggling to make ends meet. Their arrival, however, puts additional pressure on local manufacturers, who must compete with imports while trying to contain their own costs by sourcing inputs both locally and internationally. Businesses are operating in a competitive market and have every incentive to keep prices down: they are accountable to shareholders, and if they cannot make a profit, their share prices suffer and their businesses may eventually fail. They cannot sustain losses indefinitely.
Anyone planning a serious review of food prices in South Africa will have to examine all the contributing factors, using researchers who are impartial, non-political and analytical enough to get to the root causes of continuing price increases, rather than relying on anecdotal evidence or listening to politicians standing up and blaming farmers, manufacturers and retailers.
Editorial Disclosure & Disclaimer
Financial News Daily is an independent business news syndicate and a wholly owned subsidiary of Idea Accelerator. We publish financial, environmental and corporate commentary for digital platforms, media outlets and organisations. Nothing published here constitutes investment, legal or financial advice. All opinions are editorial commentary on matters of public and economic interest.
