South African agricultural organisation Agri SA intends to write to Department of Agriculture, Land Reform and Rural Development Minister Thoko Didiza requesting an engagement with stakeholders in the agricultural value chain to discuss implications of the government's stated intention of tackling food pricing.
In a statement yesterday, Agri SA agricultural economist Kulani Siweta said this followed the recent announcement by Minister in Presidency Khumbudzo Ntshavheni that Cabinet had directed the Economic Cluster to put in place an action plan on food prices, food security and access to food.
"While Agri SA shares government’s concerns about the rising cost of food, government interference in the market could lead to empty supermarket shelves," Siweya said.
The agricultural organisation said food price inflation remained high, but the latest Essential Food Price Monitoring Report released by the Competition Commission last week recognised that, while some input costs were decreasing, other critical inputs remain high as a result, for example, of load shedding and rising fuel costs.
Siweya said this highlighted the highly complex dynamics of the food system and how, if it wanted to substantively address the situation, the government could begin by fixing functions within its remit including fixing road and port infrastructure, reducing rural crime and ending load shedding.
Agri SA said it was mindful of the critical importance of the food chain for the country.
Thus, the theme of its 2023 Congress, which will be held on October 13-14, was ‘Food Certainty’ which looked not only at food production, but also food accessibility, affordability and safety amongst other elements. It said these themes merited extensive engagement as there was no simple or single solution to the multifaceted challenge of rising food prices.
Siweya said interference by the government, however, was no solution to rising food prices.
"Rather, it demonstrates a misdiagnosis of the situation and is a reflexive reaction with significant potentially adverse consequences," Siweya said.
He added that all knew from historic examples globally that well-intentioned price controls could create market distortions.
"By reducing the profit motive of value chain participants, these measures can reduce innovation as well as the quality and availability of products and services.
"It is also important to distinguish between short-term price spikes and long-term market dynamics, neither of which are best addressed through broad government interference, but rather require appropriately tailored solutions. In fact, knee-jerk reactions to short-term problems can have detrimental long-term effects," Agri SA said.
The organisation said it was, therefore, calling for a nuanced approach to all the factors affecting food prices, coupled with measured and well-crafted policies underpinned by sound economic principles.
Any interventions must strike an appropriate balance between addressing the issues identified and preserving the advantages of a free and competitive market.
"Agri SA is willing and available to engage the government on these issues so that, together, we can protect South Africa’s food security."
Yesterday, the Agricultural Business Chamber (Agbiz) said that if an optimistic crop production materialised, there could be a recovery in the global grains and oilseeds stocks, thus keeping global grain prices sideways over the medium term.
Wandile Sihlobo, the chief economist at Agbiz, said the significant risk was the ban on India's rice exports.
"India is an essential global agriculture player; the affected non-basmati white and broken rice accounts for 18% of global rice exports. A ban on such export volume adds upside pressure on prices and limits the gains of the sizeable global harvest by slowing prices to consumers. Another problem is Russia's decision to halt the Black Sea Grain Deal, brokered by the UN and Turkey to combat a global food crisis. Russia's refusal to renew the deal risks global grain prices," Sihlobo said.
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