Food prices weigh on Southern Africa

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JOHANNESBURG/LUSAKA — A tight grain supply outlook after several bumper harvests is set to fan food price pressures in Southern Africa, fuelling salary demands and threatening to knock the region’s fragile economies out of kilter.

Erratic rains have delayed the planting of the crucial maize crop in Zambia, pushing inflation towards double digits, while bread basket South Africa is importing the staple despite abundant harvests because of worries it has exported too much.

With a high proportion of households in the region spending much of their limited income feeding themselves, rising food inflation is likely to further stoke union demands in wage negotiations.

It will also make it tougher for South Africa’s central bank to refrain from hiking interest rates as it grapples with sluggishness in the region’s dominant economy.

Bumper crops in recent years, including in Zambia and Malawi, have helped contain food inflation.
“In the case of Southern Africa, it would appear the success story of recent years is increasingly becoming more of a threat to the inflation picture,” said Razia Khan, head of Africa research at Standard Chartered.

“Zambia . . . had seen record grain harvests. While the new government will devote even more attention to boosting agriculture, it may not be sufficient to hold food prices — and inflation — down, if the rains are less favourable.”

Zambia’s big yields have been attributed to government subsidies to peasant farmers in the form of fertiliser and seeds, but the crop ultimately depends on rain and the country’s Agriculture minister said last Thursday things had gotten off to a bad start because of erratic weather.

Zambian inflation slowed to 7,2 in December from 8,1% in November, but the trend is seen reversing.
“If the rainfall pattern continues like this and we have a bad crop, then we are definitely going back to double-digit inflation,” said Chibamba Kanyama, an analyst with the think-tank Economics Association of Zambia.