Africa Food Prices are Soaring amid High Import Reliance
Factors include the region’s heavy reliance on food imports and changes in food consumption and incomes
Staple food prices in sub-Saharan Africa surged by an average 235 in 2020-22, the most since the 2008 global financial crisis.
This is commensurate to an 8.5% rise in the cost of a typical food consumption basket (beyond generalized price increases).
Global factors are partly to blame.
Because the region imports most of its top staple foods – wheat, palm oil, and rice – the pass-through from global to local food prices is significant, nearly one-to-one in some countries.
Prices of locally sourced staples have also spiked in some countries on the back of domestic supply disruptions, local currency depreciations, and higher fertiliser and input costs.
– In Nigeria for example, the prices of both cassava and maize more than doubled even though they’re mainly produced locally.
– In Ghana, prices for cassava escalated by 78% in 2020-21, reflecting higher production costs and transport constraints, among other factors.
Using price data from 15 countries on the five most consumed staple foods in the region (cassava, maize, palm oil, rice, and wheat), the IMF find that in addition to global food prices, net import dependence, the share of staples in food consumption, and real effective exchange rates drive changes in local staple food prices.
Of these, the consumption share of each staple has the largest price effect.
This is due, in part, to income.
Better-off households can afford a wider range of foods, but for the poor there are very few substitutes for staples, which make up nearly two-thirds of their daily diet.
The IMF estimate that a 1% increase in the consumption share of a staple food raises the local price by an average 0.7%; the effect is even bigger when a staple is mostly imported, raising the price by about 1.2%.
When a country’s net import dependence increases by 1%, the local real cost of a highly imported staple is expected to increase by an additional 0.2%.
The relative strength of a country’s currency is another driver as it affects the costs of imported food items.
The IMF find that a 1% depreciation in real effective exchange rates increases the price of highly imported staples by an average 0.3%.
Staple food prices in the region are also impacted by natural disasters and wars, rising by an average 4% in the wake of wars and 1.8% after natural disasters, depending on the magnitude, frequency, duration, and location of events.
Role of policy
The IMF looked more closely at the variation in prices between countries and determined that those with stronger monetary policy frameworks are better at curbing direct and second-round food price inflationary pressures, and in turn, controlling overall inflation.
In contrast, food prices tend to be higher in countries with weaker fiscal management and elevated public debt.
These results suggest a mix of fiscal, monetary, and structural reforms could help lower food inflation.
For example, improving public financial management could help free up resources for investment in well-targeted social assistance programs or in climate-resilient infrastructure.
This could help stabilise prices.
Policymakers could also help make agricultural inputs such as seeds and fertilisers cheaper by introducing structural and regulatory reforms that promote fair competition, as well as by streamlining trade procedures and better leveraging research and development to boost agricultural innovation.
This article first appeared here.
Off the rails
Passenger rail travel has been in decline for years in South Africa.
Between 2008 and 2019 travel on trains dropped from around 50 million a month to just 10-million.
And then the COVID-19 lockdown happened, which put the final nail in the coffin for passenger rail.
In July 2022 there were just 1-million monthly trips, a staggering 98% decline from the 52-million trips in 2008.
Given the current state of railway maintenance (and theft) there seems little hope that we’ll see the resurgence of train travel any time soon.
Overseas demand for goods from China is weakening as the global economy slows. The slowdown in external demand is the biggest uncertainty faced by China’s trade. Chinese companies are reporting falling orders, as the demand from major markets is declining.
An export boom that has propelled China’s economy during the pandemic is showing signs of waning as soaring inflation and other headwinds elsewhere suppress global demand. Exports in US dollar terms expanded 7% last month, the weakest pace of growth since April 2022 when a lockdown in Shanghai disrupted ports and snarled trade.
Meanwhile, the cost of shipping goods from China has slumped to the lowest level in more than 2 years as the world economy stumbles.