22 September 2023
By: Nico van Burick
Government intervention in food prices can lead to unintended consequences and even empty store shelves.
Agri SA has strongly criticised the decision that the economic grouping within the government should formulate an action plan on food prices, food security and access to food.
This decision was announced by Khumbudzo Ntshavheni, Minister in the Presidency, who said the Competition Commission had been monitoring the prices of essential food items since the declaration of the Covid-19 state of disaster in March 2020. This was done to ensure the availability of affordable and accessible essentials.
Ntshavheni said the commission had observed that prices rise quickly and often exceed the cost increase, then fall slowly when the cost pressure decreases. “This indicates concentration in the food and retail markets, which is a concerning contributing factor.”
Christo van der Rheede, executive director of Agri SA, emphasises the importance of keeping the government as far away as possible from trying to determine food prices. “The free market must be allowed to do its work,” he says.
“There is enough food in South Africa, but we all agree that it has become very expensive over time. However, this has nothing to do with the agricultural sector or other parts of the value chain driving prices.”
Van der Rheede says there are many internal and external factors at play, and if the government interferes and tries to manipulate food prices without considering these, it could lead to serious problems and even empty store shelves.
Farmers have to produce despite a significant increase in input costs, such as diesel, as well as costs due to load-shedding. “We cannot afford a situation where the government wants to determine the profitability of farming. South Africa does not provide the state support that farmers in Europe and America, for example, receive.”
Van der Rheede also warns that the situation should not be exploited for political purposes. “Remember, there’s an election coming, and the government will do everything in its power to attract votes and stay in control.”
Kulani Siweya, an agricultural economist at Agri SA, says the organisation will ask Thoko Didiza, Minister of Agriculture, Land Reform and Rural Development, to consult all stakeholders in the value chain about this.
“Government interference is not a solution to rising food prices. It reflects a misdiagnosis of the situation and a reflexive response that could have potentially significant adverse consequences,” he says.
“We know from historical examples worldwide that well-intentioned price controls can lead to market disruption. By reducing the profit motive among participants in the value chain, it can limit innovation and threaten the quality and availability of products and services.”
Siweya says if the government wants to make a constructive contribution, it can start by repairing road and port infrastructure, combating rural crime and ending load-shedding.
“Agri SA is aware of the crucial importance of the food chain for the country. That’s why ‘food security’ is the theme of its upcoming congress.”
Siweya says Agri SA is willing and available to work with the government to protect food security.
