By Saliem Fakir · 12 Jan 2012
The ANC’s next hundred years depends quite distinctly on what happens at its July 2012 policy conference in Mangaung and more importantly, on its implications for the South African economy as a whole.
The Achilles heel of the ANC has always been the economy with the last 17 years proving to be a mixed blessing for the party, which has not been convincing in its ability to make the economy work for the country’s majority who remain economically disenfranchised -- also facing hunger and malnutrition on a daily basis these days due to rampant food inflation.
One can’t dispute that there are important economic discussion documents on the table, such as the National Growth Path and so on, but they tell us little about a transformational economic policy and the strategic choices that our government is willing to make, which would mark a significant shift from the past.
For now, macro-economic policy has remained the same - largely in the service of the markets - while micro-economic interventions are being pursued with very little resources and capacity to support them.
While the ANC has kept macro-economic policy in line with the dominant paradigm and the interests of local and international capital, it appears to have hoped that by improving the development dividend through rapid service delivery, it would survive the need for addressing the underlying economic deficiencies.
The ANC’s early years in government certainly bore witness to a spurt of service delivery efforts with the party seeking to expand services to previously un- or under serviced communities, if one considers the expanded provision of water, electricity, housing, healthcare, education and so on. Needless to say, while these services reach significantly more South Africans now than during the apartheid era, it is the quality of these services that remains indomitably problematic.
Besides, even with basic service provision, outside that which is subsidised, these are increasingly becoming unaffordable.
Moreover, general impoverishment has merely served to increase dependency on the state without creating viable local economies and jobs. It is “the local” where the ANC appears weakest in terms of its ability to affect change for the lived reality of the majority of South Africans.
And, local problems are the result of systemic issues, which stubbornly remain unresolved.
Food inflation is a critical example of how systemic problems manifest. Food prices provide a fair measure of the health of a country’s economy because multiple factors act together to determine pricing. Food inflation also tells us about the relative resilience of households to external stress.
In South Africa, food inflation indices have persistently exceeded general inflation for several years now. They have varied between 10-15% from 2010-2011 (according to the National Agricultural Marketing Council).
But for those who represent the poorest 30% of the population food costs as a share of monthly income ranged from 35%-37% and for the wealthiest 30% of the population, food costs, as a share of monthly income ranged between 2-3% from 2010-2011.
General inflation last year was slightly over 6% already breaking through the Reserve Bank’s inflation target band of between 3-6%. Food inflation was the biggest contributing factor.
While international factors do play a role, much of food price inflation is attributable to domestic policies and market conditions.
A study by Logan Rangasamy published in the South African Journal of Economics (June 2011) showed that between 2000-2008, food prices had the biggest inflationary impact compared to other goods by a factor of 1.4 times more. Food consumption and pricing plays a significant role in developing countries because food is the largest consumable in the basket of goods from which general inflation is measured. The study further showed that 88% of food price variation is a result of domestic influences rather than international.
The main conclusion of the paper is that national policy has a big and important role to play in controlling food price inflation.
What does this mean for the ANC at its policy conference, particularly in relation to economic policy?
Firstly, service delivery protests in general reflect the erosion of incomes of households that are unable to put food on the table. Protests are both a result of not having a basic service or because basic services are being cut-off because people make the rational choice of putting food on the table first rather than paying the water or electricity bill.
Secondly, urbanization increases the dependency on income as a means of purchasing affordable food because rural subsistence agriculture no longer complements food security.
A decline in income and remittances to rural areas also affects food security in rural areas and reduces the availability of sufficient capital to sustain subsistence and even semi-commercial agricultural activities in rural areas.
This lack of capital points to lower remittances from migrant workers who may no longer find jobs in urban areas, mines or other sectors of the economy that enabled remittance income to flow into rural areas. The consequence is that both non-cash and cash based means of food security are being strained.
Thirdly, fuel and electricity, which are key energy input costs have gone up dramatically by as much as 30% or more in the last two years. Households don’t only pay higher energy costs directly, but also indirectly, leaving very little flexibility for the purchase of decent food. One area that could be looked at is reducing dependency on imports of oil because oil prices have gone up and the cost of imported oil is very dependent on the strength of our currency.
Fourthly, agriculture and food are subject to monopoly practices by big agribusiness and supermarkets. The Competition Commission, for instance, has already investigated bread price fixing in a well-publicised case.
Vigilance in the area of food monopoly needs to continue and can only be advanced by enhancing and supporting consumer pressure on food companies and retailers.
But the Competition Commission can only deal with symptoms, not underlying issues. The underlying issues are the failure of land reform, the liberalisation of our agricultural markets and the fact that we are increasingly becoming an importer of food rather than generating sufficiently for our own needs.
Finally, the ravaging effects of food inflation also point to the fact that while there has been growth in certain periods of the South African economy with productivity improvements, wages have been repressed on the whole. Even with inflation, workers ought to cope with price rises if they had a fairer share of economic prosperity.
Thus, while the ANC feasted during its celebrations it should not forget that a prolonged economic famine for the poor and the inability to put food on the table will increase social grievance -- this does not bode well for the popularity of the ANC over the next hundred years.
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The problems around food security are well put here. Elected officials and government are far removed from the problem. Business response is to put up chain stores in impoverished areas. It seems local communities have to come up with innovative ideas and practises to address food affordability.
Emerging farmers and alternative markets can play a huge role in addressing local food security. Our farmer's organisation is attempting to address this, but with little support it is rough.