From Feast to Famine: Will the ANC Survive Another Hundred Years under Rampant Food Inflation?

Cape Town, South Africa:

The ANC’s next hundred years depends quite distinctly on what happens at its July 2012 policy conference in Mangaung and more importantly, on its implications for the South African economy as a whole.

The Achilles heel of the ANC has always been the economy with the last 17 years proving to be a mixed blessing for the party, which has not been convincing in its ability to make the economy work for the country’s majority who remain economically disenfranchised and are these days facing hunger and malnutrition on a daily basis days due to rampant food inflation.

One cannot dispute that there are important economic discussion documents on the table, such as the National Growth Path, but they tell us little about a transformational economic policy and the strategic choices that the South African government is willing to make that would mark a significant shift from the past.

For now, macro-economic policy has remained the same – that is, largely in the service of the markets – while micro-economic interventions are being pursued with very little resources and the capacity to support them.

Macro- and micro-

While the ANC has kept macro-economic policy in line with the dominant paradigm and the interests of local and international capital, the party appears to have hoped that by improving the development dividend through rapid service delivery, it would bypass the need to address the underlying economic deficiencies.

The ANC’s early years in government certainly bore witness to a spurt of service delivery efforts with the party seeking to expand services to previously un- or under serviced communities, such as expanded provision of water, electricity, housing, healthcare and education. Needless to say, while these services reach significantly more South Africans now than during the apartheid era, it is the quality of these services that remains problematic.

Even with basic service provision, outside that which is subsidised, these are increasingly becoming unaffordable.

Moreover, general impoverishment has merely served to increase dependency on the state without creating viable local economies and jobs. It is “the local” where the ANC appears weakest in terms of its ability to affect change for the lived reality of the majority of South Africans. And local problems are the result of systemic issues which stubbornly remain unresolved.

Food glorious food

Food inflation is a critical example of how systemic problems manifest. Food prices provide a fair measure of the health of a country’s economy because multiple factors act together to determine pricing. Food inflation also tells us about the relative resilience of households to external stress.

In South Africa, food inflation indices have exceeded general inflation for several years now. Last year, food and beverage inflation reached a two-year high of around 7.4%.

For the poorest 30% of the population, food costs as a share of monthly income ranged from 35%-37% and for the wealthiest 30% of the population between 2-3% in 2010-2011.

General inflation last year was slightly over 6% already breaking through the Reserve Bank’s inflation target band of between 3-6%. Food inflation was one of the biggest contributing factors in this.

Market forces

While international factors do play a role, much of food price inflation is attributable to domestic policies and market conditions.

A study by Logan Rangasamy published in the South African Journal of Economics in June 2011 showed that between 2000-2008 food prices had the biggest inflationary impact compared to other goods by a factor of 1.4 times more. Food consumption and pricing plays a significant role in developing countries because food is the largest consumable in the basket of goods from which general inflation is measured. The study further showed that 88% of food price variation was a result of domestic influences rather than international factors.

The main conclusion of the paper is that national policy has a big and important role to play in controlling food price inflation.

Making policy

What does this mean for the ANC at its policy conference, particularly in relation to economic policy?

Firstly, service delivery protests in general reflect the erosion of incomes of households that are unable to put food on the table. Protests are both a result of not having a basic service or because basic services are being cut off because people make the rational choice of putting food on the table before paying the water or electricity bill.

Secondly, urbanisation increases the dependency on income as a means of purchasing affordable food because rural subsistence agriculture no longer complements food security.

A decline in income and remittances to rural areas also affects food security in rural areas and reduces the availability of sufficient capital to sustain subsistence and even semi-commercial agricultural activities in rural areas.

This lack of capital points to lower remittances from migrant workers who may no longer find jobs in urban areas, mines or other sectors of the economy that enabled remittance income to flow into rural areas. The consequence is that both non-cash and cash-based means of food security are being strained.

Thirdly, fuel and electricity, which are key energy input costs have gone up dramatically by as much as 25% or more in the last two years. Households do not only pay higher energy costs directly, but also indirectly, leaving very little flexibility for the purchase of decent food. One area that could be looked at is reducing dependency on imports of oil because oil prices have gone up and the cost of imported oil is very dependent on the strength of the South African currency.

Fourthly, agriculture and food are subject to monopoly practices by big agribusiness and supermarkets. The Competition Commission, for instance, has already investigated bread price fixing in a well-publicised case.

Underlying issues

Vigilance in the area of food monopoly needs to continue and can only be advanced by enhancing and supporting consumer pressure on food companies and retailers.

But the Competition Commission can only deal with symptoms, not underlying issues. The underlying issues are the failure of land reform, the liberalisation of our agricultural markets and the fact that we are increasingly becoming an importer of food rather than generating sufficiently for our own needs.

Finally, the ravaging effects of food inflation also point to the fact that while there has been growth in certain periods of the South African economy with productivity improvements, wages have been repressed on the whole. Even with inflation, workers might be able to cope with price rises if they had a fairer share of the country’s economic prosperity.

Thus, while the ANC feasted during its celebrations, it should not forget that a prolonged economic famine for the poor and their inability to put food on the table will increase social grievances. This does not bode well for the popularity of the ANC over the next hundred years.

This article was originally published by the South African Civil Society Information Service, a non-profit news agency promoting social justice.

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