Global crisis looms again and SA will not escape

The world is heading towards a global food crisis similar to that experienced in 2008, but ironically seems to be less prepared to respond to the crisis than was the case three years ago. Local analysts have also warned that South African consumers will have to tighten their belts as the festive season  approaches.

Local analysts warn that the prices of meat, poultry and oil will continue to increase towards the end of the year after adverse weather conditions decimated crops across the globe.

At the international level, Simon Maxwell, a senior research associate of the British Overseas Development Institute wrote in a recent article for the site openDemocracy:“The world is in the middle of a food crisis. But both the economic understanding and the political impetus are less than they were in 2008. They need to be improved as the basis of an effective response.”

He notes that the famine in east Africa rightly dominates the headlines, but the situation there is essentially a localised one and not caused by a global food shortage.

“In global terms, prices have begun to ease a little, but they remain very close to levels last seen in 2007-08 - when the food crisis was centre-stage, until it was displaced by the financial meltdown of August 2008. The World Bank’s food-price index of August 2011 remained 33% above the level of a year previously, and only about 10% below the 2008 peak. Similarly, the FAO price index shows that prices are more than twice the level reached before the 2007-08 spike - itself justifying the FAO’s initiative on soaring food prices.

“Moreover, high global prices are mirrored at country level: unevenly, but in some cases with startling clarity. In countries as widely dispersed as Uganda, the Dominican Republic and Kyrgystan, staple prices have doubled (or nearly so) in 2010-11. Elsewhere, they have gone up by a half or more.

“The national and international responses have varied: from increasing food subsidies (as in Egypt, where food and energy subsidies together account for a third of government spending) to initiatives from the G20 (such as the multi-agency report on price volatility it commissioned, published in June 2011 and the Paris communiqué of agriculture ministers which will inform the Cannes summit in November),” writes Maxwell.

In South Africa prices for a number of staple food items have rocketed in the past year.

According to Statistics SA’s basket of goods, the price of lamb has increased by R15.25 per kilogram, margarine went up by R3.65 per 500g , bread went up by R1 per loaf.

According to the Bureau for Econo0mic Research food inflation in South Africa is running higher than general inflation and this is expected to remain the case until April next year. Inflation currently runs at 5.3% and food inflating at 7.5%.

General inflation is expected to climb to 6.6% by the end of this year – 0.6% above the Reserve Bank’s target. Some analysts predict that food inflation will climb to 10% by December this year before it will taper off to 8% by April.

Maxwell warns that estimates of the impact of the global crisis seem less visible and more muted than last time (when, for example, the then World Bank president Robert Zoellick warned that the crisis would drive 100 million people below the poverty-line, and reverse seven years’ worth of gains in poverty-reduction).

And, macroeconomic issues are less to the fore than in 2008 (when the IMF, for example, published reports on the balance-of-payments, inflation and fiscal problems associated with food imports and social-protection programmes such as food subsidies).

There is also less political urgency. While Nicolas Sarkozy (French president and present chairman of the Euripean Union) has made food-price volatility a G20 priority and Robert Zoellick and Josette Sheeran (of the WFP) are consistently vocal on food issues, “the food crisis is not as high a priority as when the UN’s Ban Ki-moon established a high-level task-force on the global food-security crisis, which produced a respected comprehensive framework for action.

“This time, the G20’s agriculture ministers seem to be in the lead. That is a worry, insofar as a basic truth of food crises is that their implications go well beyond agriculture - and reach  into social welfare, macroeconomic management, and trade policy.”

Maxwell concludes that a “big responsibility here devolves on G20 leaders, to think anew about the food crisis of 2011. That means recognising its importance; acknowledging the economic and political risks; supporting investments in agriculture, improvements in transparency, and guarantees of  locally managed stocks; moving at least a little on speculation and (especially) biofuels; and then facing the need for much larger and more reliable shock mechanisms.

“All this would be good economics and good politics. The millions made vulnerable by food-price fluctuations around the world - actual and potential - deserve no less.”

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