Food inflation soars above 15%

Do you know what an average food-basket costs in South Africa? In June 2021, it cost about R4 137.43. Let me tell you something you may find very interesting. In South Africa, some items in the food basket have seen increases of prices of between 31% and 68% between 2020 and 2021. These are items such as cooking oil and garlic.

Here is my point and this might shock you; the average food basket per household, per month (in both South Africa and Lesotho), is way above the minimum wage. I mean a food-basket takes into account staples such as a bag of maize-meal, a bag of bread-flour, eggs, milk, cooking oil, beans, soap, toothpaste and toilet paper.

The problem with toilet paper is that in Lesotho, newspapers such as thepost and Moeletsi-oa-Basotho come in handy as a substitute for toilet paper come mid-month. That’s why I hate to see my photo in each opinion piece. You gerit? If you don’t gerit, forget about it! But let’s take a hypothetical example and say the average food basket is about M3 000.00 in Lesotho, this is still above the minimum wage. The question is, why is food way above the targeted inflation rate of the Central Bank that is between 4 and 6%? Maybe, this is a question that our brothers and sisters from the Central Bank can answer for us. What about the rate of inflation on electricity and fuel?

Before we start, who is the statistician general of the Bureau of Statistics? Do we even have one? If yes, his/her silence is very loud. Second question; do we need a Central Bank in Lesotho? Or should I rephrase my question to ask; do we still need a Central Bank in Lesotho?

Its funny because a lot of people have criticised our Central Bank to say it only does a copy and paste of what the South African Reserve Bank does. But I must come in defence of the Central Bank of Lesotho. It has tried to steer the ship under very difficult circumstances (poor political leadership) and much credit must be given to the Central Bank for developing the new office complex.

I’m pro-development and the development of the new offices is quite commendable. Secondly, holding banks to account in a form of publishing their financial results should be taken in high regard. I wish the same could be imposed for insurance companies. We need to see those financial results and see where Basotho deposits are “hidden” in Cape Town.

Let’s refresh our minds a bit. What is the primary role of a Central Bank in a country? In economics 101, we learnt that the role of a central bank is to conduct the monetary policy in order to achieve price stability. Secondly, it is to regulate the financial services sector. Thirdly, it is to stabilise the currency.

What does price stability mean? It is the general levels of prices in an economy. It means the Central Bank has to avoid prolonged inflation and deflation of goods and services. But what is inflation you may ask? When loosely translated, inflation is the steady rise of prices of goods and services over a period of time. Or simply, the persistent rise in the average level of prices over time.

In Lesotho and South Africa, we use a method called the inflation targeting strategy or framework used to control interest rates in order to achieve low and stable inflation. This is achieved by keeping the inflation rate between 4 and 6%. But what “inflates” inflation? It could be several factors but the most obvious are factors related to a persistent demand of goods and services and if a currency suddenly weakens.

Is inflation good or bad? In my opinion, inflation is bad because it erodes an ability of a household to afford basic goods and services. Or simply, it erodes an ability (purchasing power) of a person, households and citizens to afford goods and services.

Let’s take a simple example. There are certain services that are way above the targeted inflation rate. Let’s take the persistent increase on the rate of electricity or electric as some people fondly call it. What does this do? We call the purchase of electricity a grudge purchase. A consumer will pay for this service whether they like it or not. Sometimes, with very teary eyes. The same could be said for petrol. But what does this consistent increase on electricity have on the economy? Or cement to a certain extent? Because Basotho just love their cement.

Inflation erodes an ability of citizens to afford other goods and services. Let’s make an example that you can easily relate to. If the prices of cement, electricity and petrol increase persistently, it will result in Maseru citizens being unable to buy food at Spur restaurant. Or let’s put it this way, If a person was able to buy a rib and wings combo and top it up with three cans of Maluti lager beer, they would have to downgrade to a burger and chips a year later. And possibly, one can of Maluti beer.

Then a year later, downgrade to being able to afford one can of Maluti beer per visit. And as things were before Spur closed down in Maseru, people were just going there not to buy but to drink hot water with lemon. This is what inflation does to an economy. But the most dangerous factor of all is what we call food inflation.

This is by far the most dangerous form of price increase because we all need to do one thing at the end of the day, and that is to eat. This is a grudge purchase of all grudge purchases. Now, if prices of food escalate to levels that are uncontrollable, it means citizens are unable to afford other goods in the food basket. By the way, when I asked whom the statistician general was, do we have someone that has calculated what an average food basket costs per household, per month? I’ve never heard anyone from the Bureau of Statistics giving us an indication of how much it costs.

But my point is here; how is an average household able to afford food in Lesotho? You know, I’ve been studying this interesting trend over the past few years. My mother sells eggs in a village named Ha S’kepe. So, the price of eggs has increased astronomically due to the cost of inputs (animal feed). Animal feed is mainly influenced by the increase of yellow maize (grains) and fuel. If grains increase by levels that are uncontrollable, this will push the price of eggs up. As the price of eggs shot up, the affordability of eggs plummeted. People started buying eggs at irregular patterns and more towards month-end. A tray of large eggs is now something like 46 Maloti/Rands, whilst it averages 60 Maloti/Rands at Shoprite or Pick’n-Pay.

Having said all these, how are poor people able to put food on the table? Isn’t it time we think of a basic income grant? I’ll tell you why. In the long term, the social cost of a nation that suffers from malnutrition is devastating. We may not see it now, but we’ll see the effects of it in ten or twenty years to come.

But, where does a nation strike a balance? At what point does a nation prioritise on social investment than on infrastructure development? What is the true cost of social destruction? I’m talking about unemployment that leads to crime, prostitution, malnutrition and many other social ills.