Mozambican govt firm on price increase

A volley of price increases in basic commodities and services has sparked two days of rioting and looting in the Mozambican capital, Maputo, but the government is refusing to rescind them.

“The price increase is irreversible. Prices will only fall if all of us work hard,” government spokesperson Alberto Nkutumula told a press conference after a cabinet meeting on September 2. He also announced that a five-year programme to eradicate poverty would be implemented.

“This proves that we’ve got a blind and deaf government,” protester António Muchanga said
Media reports claim that seven people, including two children, have been killed and hundreds injured in the past two days of disturbances, and that security forces used live ammunition in their attempts to suppress the protests, an accusation denied by government.

The price of a loaf of bread will rise by 25% today, although many shops are said to have already factored in the increase. In recent days water tariffs have risen by 11% and electricity by 13,5%.

About half of Mozambique’s 20 million people live below the poverty line, despite an average economic growth rate of 8% for the past 15 years, but in 2009 this slowed to 5% in the wake of the global recession.

Official unemployment is around 21%, but in Maputo, a city of about 1,5 million, the poverty level is estimated as high as 60%.

The prices of staple foods, such as maize and rice, have come under increasing pressure, despite “satisfactory” cereal production of maize, sorghum, millet and paddy rice – projected at 2,49 million tons, 5% lower than the record 2008/09 harvest – said a report on a crop and food security assessment mission by the UN Food and Agriculture Organisation (FAO) and World Food Programme (WFP), published on August 12.

However, the national harvest disguises a skewed rainfall pattern across the country that favoured the north and left the south dry, creating internal price pressures.

“In the north of the country rain was timely and well-distributed. However, in the southern and some western parts of the central region, and in the entire southern region, the first rains arrived late and were followed by a period of up to two months of poor or negligible rainfall, which necessitated extensive replanting,” the crop assessment noted.

As a result, maize production in the north increased by 12% from the previous year, but fell by 38% in the south, and 4% in the central regions.

In rural areas cassava and maize are generally favoured; in Maputo and other urban areas in the south, bread, rice and maize-flour are preferred. In June 2010, “The price of maize in Maputo, at 13,45 meticais ($0,37) per kg, was twice as high as prices in northern Nampula ($0.16),” the report said.

Rice production in the south was 30% lower than the previous year, because “Large areas of rain-fed rice were lost as a result of the prolonged dry spell at the beginning of the season,” the authors commented.

“Prices of rice, the most consumed cereal in Maputo and in southern urban areas, have remained at high levels and increased, reflecting this year’s poor harvest. This is affecting the food access of the low-income population.”

“In Maputo and urban areas of the south . . . consumers tend to shift consumption patterns in accordance with relative prices of the main staples.

Thus, when rice prices are higher than maize flour prices in urban areas, many households shift from rice to maize consumption.”

The abundant harvest in the north, with improved road and bridge infrastructure to take the maize south, should have kept prices stable, but the bounty has been tempered by transportation costs that have seen diesel prices rise by 24% since March 2010, making it cheaper to source maize from South Africa, despite value added tax (VAT) of 17%.

Currency fluctuations between the metical and the rand, which rose by approximately 30% between May 2009 and May 2010, could make South African maize less competitive.

The crop report estimates that “250 000 people from low-income households in the semi-arid and arid areas of Tete, Gaza, Inhambane and Sofala provinces will require some 40 000 tonnes of emergency food assistance to meet their basic dietary requirements from August until the next harvest in March 2011.”

In 2008 at least four people were killed in protests against increased fuel prices, but government backed down and put on a hold on the increases.

João Mosca, a Maputo-based economist, said that in 2009, an election year, Frelimo – which has held power since independence from Portugal in 1975 and weathered a 16-year civil war – suppressed price rises to woo voters.

Manipulating the economy during the electoral period has now led to generalised price increases, Mosca said, but “government has to be conciliatory, otherwise the riots might continue.”

The FAO noted on September 1 2010 that the world food price index had risen by 5% from July to August, the highest level since 2008. — Irin

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