Food prices remain stubborn while dreaded El Nino nears

Mbongeni Mguni | Monday May 8, 2023 06:00

Since hitting a 14-year high last August, inflation has declined over the months, dropping back to single digits in January, the first time it had done so since April 2022.

Many consumers, however, have argued that the drop in the inflation figures has been arithmetic and belies the fact that for many, prices generally remain at elevated levels. In fact, when inflation dropped to 12% in December, from 14% in previous months, Mmegi used the analogy of a vehicle moving to 120 kilometres per hour, from 140 kilometres per hour; it’s still speeding.

Further confirming consumers’ viewpoint, Statistics Botswana’s latest reports show that the drop in inflation in recent months to single digits has not crossed over to the prices of food. As average annual inflation fell to 9.9 percent in March, food inflation reached 17.8%.

Analysts, including experts at the Bank of Botswana, note that the fall in general inflation in recent months has been due to lower fuel prices, a situation that has left food prices as the standout driver of the cost of living.

While Russia’s invasion of Ukraine last year sparked a global increase in both fuel and food prices, the former has gradually been easing since last year, while the latter remains as ever at the mercy of local and regional variables.

“However, international fuel prices have declined since the middle of 2022, although major oil producers have restricted supply in an attempt to keep prices high,” analysts at Econsult said in a recently released report.

“The second largest contributor to inflation is food prices, whose contribution to inflation has become more significant as fuel prices have fallen.

“Food price inflation reflects both higher regional and international prices, as well as the price-raising effect of Botswana’s import restrictions (notably on vegetables).”

As at March, the average prices of bread and cereals (maize, rice, sorghum) had risen about 27% in the 12 months before, surpassed only by the average prices of oils and fats such as cooking oil, which had jumped 37% over the same period.

Over the same period, vegetable prices are up 23%, fish up 13%, and meat up 10%.

The Consumer and Competition Authority (CCA), which compiles monthly food prices from retailers across the country, has the real picture behind the percentages tracked by Statistics Botswana. According to its report for November, the last available update, the CCA found rising maize meal prices countrywide, with a 12.5-kilogramme bag going for as much as P140.

However, data sourced from the Bank of Botswana (BoB) suggests that food prices will begin trending downwards this year, easing the pressure on households. At a press briefing last Friday, the central bank shared a forecast indicating that it expects international food prices to drop from later this quarter and remain at a softer level all the way to the first quarter of 2025.

In fact, the BoB expects inflation to temporarily dip below the six percent level in the coming months, the first time the cost of living indicator would trend within the central bank’s target threshold since April 2021. Favourable Value Added Tax cuts on various food and non-food items, the strengthening of the Pula against the Rand and benign forecasts for international commodity prices such as oil, are expected to keep prices softening in the medium term.

The fly in the ointment is this week’s confirmation of what had, up until that point, been an increasingly worrying possibility. According to the World Meteorological Organisation, the dreaded El Niño phenomenon will rear its ugly head again this year, bringing heatwaves and dry conditions to most parts of the Southern Hemisphere.

In Botswana, the years 2014 to 2016 will be remembered as being some of the driest on record, a period during which temperatures reached 46-year peaks and Gaborone Dam failed for the first time in its history, turning the capital into a treasure hunt for water, as residents spent most of their time laden with containers, in search of supplies.

The El Niño phenomenon produces increased thunderstorms in places such as South America and colder winters in Europe. However, in Southern Africa and Botswana in particular, El Niño brings dry rainy seasons, heatwaves, bushfires, crop failures, livestock deaths and drought.

In Botswana, El Niño rattles food security and increases the weight on government’s social security schemes such as poverty alleviation, destitute programmes and Ipelegeng. The phenomenon empties silos kept for the country’s strategic grain reserve and, because Botswana is a net importer of most food, it raises the prices on the shelves.

“The development of an El Niño will most likely lead to a new spike in global heating and increase the chance of breaking temperature records,” World Secretary-General, Petteri Taalas said in a statement this week.

“The world should prepare for the development of El Niño, which is often associated with increased heat, drought, or rainfall in different parts of the world.”

The Food and Agriculture Organisation (FAO), meanwhile, expects El Niño conditions to return by June 2023, warning that the phenomenon is “a key driver of extreme weather events that pose high risks to global food security”.

“Countries where the entire crop cycle could be affected by drier‑than-average weather conditions, are of particular concern, as water deficits could curtail both plantings and yields with compounding negative impacts on final production,” FAO researchers stated.

“These countries are located in Central America, southern areas of Far East Asia, Southern Africa and northern parts of South America.”

Both the World Meteorological Organisation and the FAO agree that countries need to boost their early warning systems to better monitor cycles such as El Niño. The much-repeated call for greater resilience amongst countries that are most vulnerable to weather and climate cycles will begin echoing again as the months move to the Southern Hemisphere’s summer.

For consumers, however, the latest threat is the continuation of pains in the pocket that have been felt as far back as the height of the pandemic three years ago.