Manuel calls for calm, while Vavi warns of looming crisis in South Africa.
“Don’t panic,” Finance Minister Trevor Manuel urged yesterday as food riots spread around the world.
While global financial leaders have declared an international food emergency, South African labour federation, Cosatu, planned country-wide protests against price collusion and rampant inflation in the country’s food industry. The ruling ANC has also called on the Competition Commission to investigate the causes of high food prices. The price of a loaf of bread in September this year is likely to be at least 25% higher than it was a year ago.
Speaking to Business Times from the annual spring meeting of the International Monetary Fund and the World Bank in Washington, Manuel branded the behaviour of some richer countries who subsidise farmers to produce cereals for biofuel rather than for food as “criminal”.
He urged Opec, the oil producers’ cartel, to slash the incentive to divert food to fuel by pumping more oil.
He said the current economic squeeze, which has forced the Treasury to lower the growth forecast to 4% of GDP this year, would not interfere with the social safety net on which at least one in five South Africans rely to stay alive.
But he said poor South Africans should be encouraged to protect themselves by resuming the subsistence agriculture that was a part of the country’s heritage.
“The food crisis was triggered by the shift of food into biofuels, especially in the US, where about a third of the maize is being converted into bio-ethanol,” he said.
First World farm subsidies, based on the current record cost of oil, price staple grains out of the reach of the world’s poorest people. Rich motorists outbid the world’s poor so that maize goes to fill empty fuel tanks rather than empty tummies.
“What’s happening with subsidies in some countries is just criminal,” Manuel said, without naming the US, where subsidies are highest. The IMF released a map showing the countries that benefit from the food price escalation. SA is amongst those moderately affected, but most of Africa is in the most affected category.
Western nations benefit from the higher prices as trade balances swing in their favour.
Cosatu general secretary Zwelinzima Vavi said the labour federation would begin a series of protests outside Eskom and Pick n Pay premises on April 17 to press for negotiations on food prices. “We’re moving towards a food crisis in this country because people cannot afford it.
“We want to force negotiations between the farmers, the food processors, the retailers and the government on this issue. They say the prices are because of the rising price of oil, but we want to see the figures,” Vavi said.
He said Cosatu supported the expansion of Competition Commission investigations beyond the milk and bread industries, where collusion has already been proven to other food sectors and would press for jail sentences for company directors responsible for price-fixing.
Manuel declined to say whether he would back prison terms for price fixers, but said he was strongly in favour of tougher competition regulation.
He said he supported the right of workers to engage in legal protest, but cautioned that campaigns such as Cosatu’s needed to be focused on credible goals and should not undermine the economy on which everyone depends.
“We’re in this together and I think the premature identification of enemies would be costly to the economy,” he said. “There are huge panic reactions in respect of countries who are now deciding to ban imports and exports of various crops. There is a lot of panic reaction and panic tends to drive prices up further,” he said.
Manuel insisted there was no immediate alternative to the globalised market economy that sets the prices of fuels and foods and cautioned that attempts to isolate small countries behind tariff and other barriers would backfire.
“To merely suggest right now that whatever is happening is because of some evil plot by these terrible capitalists is not the most useful of issues,” he said.
IMF and World Bank leaders have made the food price crisis the main feature of their Washington meeting this week, saying the price spiral has set the fight against poverty back at least seven years. Official figures showed that the price of wheat had more than doubled in the past year and the African and Asian staples — maize and rice — are up nearly 80% in the same period.
While there is no crisis facing people in the rich G-8 nations, including Britain, Japan and the US, millions in the developing world are having to spend up to four-fifths of their total family income on food. The World Bank estimates that 33 countries around the world face social unrest because of food and fuel price rises. Deadly food riots have already broken out in Egypt, Indonesia, Cameroon, Peru and Haiti.
Manuel said he hoped SA would not go down that road, but stressed that firm and swift international action was needed to break the price spiral.
ANC spokesman Jessie Duarte said while the party understood that food prices were influenced by exogenous factors, it did not understand how some prices went up exponentially in a country where those items were grown and manufactured locally.
Cooking oil has increased almost fourfold in 18 months, for example. “Our concern is how this impacts on the urban poor, in particular those who cannot do subsistence farming,” she said.
Standard Bank group economist Goolam Ballim said SA had the money to help should things deteriorate further, but he added that the country had never been as globalised as it is now, and it was as vulnerable to global successes as it was to global threats. The food price issue was an example.
Nico Hawkins, economist at Grain SA, said some prices, including those of wheat, had doubled in a year.
Hawkins added that the higher price of wheat was based on import parity pricing. South Africa produces a crop of about 1.6 million tons but requires about 2.8 million tons. Grains grown locally are priced the same as the imported ones.