'State's food security plan won't protect consumers'

If the government really wants to protect consumers from food price increases then it needs to grow the economy and tackle unemployment and the crippling costs of load-shedding and crime, says Wandile Sihlobo, chief economist at the Agricultural Business Chamber of South Africa.

Instructing the cabinet, as it did last week, to implement a “food security plan” more than six months after food price inflation started trending down from a high of 14.4% in March won't do it, he says. And he cautions against any attempt to use the plan as a pretext for price interference.

Sihlobo can't say if implementation of a food security plan to “cushion consumers” is about next year's elections, “but I don't know why the timing of this is now”.

“The government comes out and says there are food security issues in the country and something has to be done about it. Yes, there are food security issues in South Africa, but these are not new, we've had them for some time.”

Sihlobo says his worry is that the government seems not to appreciate the global and domestic factors driving cost increases or the extent to which local food producers have absorbed a lot of these costs rather than passing them on to consumers.

“All of these things need consideration, but does the government fully understand this?”

He believes agriculture minister Thoko Didiza does, but needs to make it clear to her colleagues in the cabinet tasked with implementing the so-called food security plan, who he suspects have no such understanding.

“One is curious about what the food security plan will be … Food inflation is already cooling.”

If the government is serious about the welfare of consumers, it needs to step back and try to understand what the drivers of poverty are, Sihlobo says.

“In South Africa, issues around poverty largely relate to income challenges — not that food prices over the long term are higher, but because many South Africans are out of work.”

This is a broader social problem requiring more extensive solutions than a food security plan supposedly to bring down food prices which have been coming down for seven months, he says. The big question is what the government intends doing to enable the economy to grow and create jobs so people can work and afford to buy food.

“That's the key issue here, because we produce a lot of food in South Africa. The fact that we export half of what we produce is not contributing to high prices or food hunger. We have sufficient food for our domestic market.

This is a broader social problem requiring more extensive solutions than a food security plan supposedly to bring down food prices which have been coming down for seven months, he says. The big question is what the government intends doing to enable the economy to grow and create jobs so people can work and afford to buy food.

“The challenge is not rising prices, but that if you don't have a job or an income, any price is too expensive.”

This is the issue that needs to be resolved and this relates to broader policy, he says.

“It's not an agricultural question, but a socioeconomic question we should be looking at. Not entirely about looking at the food space; we should be looking much broader.

“If you want a nation that is food secure, then these are the challenges you have to deal with.”

Food security is about affordability and availability, and this is not just about the income problems in South Africa.

“What one would like from government is a clear commitment to improve the logistics network, clear commitments to revitalise rural towns and improve the delivery of municipal services.”

If municipalities play their proper role, then agribusinesses will begin to thrive, invest more and create more jobs.

"If rural road networks and railway lines are functioning, that lowers the cost of doing business and of course the costs of food manufacturing and all the things related to that. On top of that we can add the dramatic costs of loadshedding and crime."

“Food prices are the outcome of a whole multitude of things in the country that are not working,” says Sihlobo, who as well as being the Agbiz chief economist is a senior fellow in the department of agricultural economics at Stellenbosch University.

“It would have been good to hear from government that they understand that input costs are high because of global factors, such as Russia's war with Ukraine, and because of the operational conditions those in food production, processing and retailing are facing domestically. And an acknowledgment of how much of the higher costs resulting from these conditions they've managed to absorb.

“And therefore, that this is how we as the government will try to address these network and related matters that are making the operational environment so hard for you.”

The message from the government needs to be “less hostile” towards business, he suggests.  Its announcement of the food security plan to protect consumers was not made in consultation with the agricultural sector, which accounts for 9% of GDP and creates employment for about 1.4-million people. The government should be “more collaborative with the private sector to resolve the long-term issues”.

Sihlobo says he hopes Didiza's voice in the cabinet will be heard in that “price interference is not the path that should be taken”. Any attempt at this path will have harmful long-term consequences, he warns.

“If you try telling businesses what price to sell at when they have no control over input costs, then you risk destroying those businesses. We have seen across the continent where governments try to control prices that it doesn't work. 

“The factors driving prices are clear. If government understands these factors, one hopes they'll understand that pricing interference will not resolve them.”

The food security plan should focus on boosting production and dealing with household income issues rather than on the pricing side, he says.

What also disturbs him about the government's food security plan is that it seems to have been based on a “deeply misguided” report on food pricing by the competition commission that was “not rooted in sound evidence” and blamed food producers and retailers for putting consumers under pressure.

A later report, seemingly ignored by the government, retracted this.

“This is why regulators have to exercise a certain level of care about the messages they put out because you don't know how they might be abused,” says Sihlobo.