Don’t panic: Food security warning for South Africa

[Nat Quinn]

Don’t panic: Food security warning for South Africa

As South Africa faces drought conditions and the risk of higher food inflation, the government should steer clear of panic-induced policy interventions like export bans and price caps, or else risk the country’s long-term food security.

El Nino weather patterns causing drought conditions in Southern Africa are raising food inflation concerns among economists – but Agricultural Business Chamber of South Africa (Agbiz) chief economist Wandile Sihlobo says the country should tread carefully when looking at how to address this.

In a note this week, Sihlobo said that drought and crop losses are leading to worries that food inflation will start surging after months of moderation – and this, in turn, has led to calls for government intervention.

While the economist notes that the government should do what it can to limit the impact of any potential price hikes on households in the country, he warned that pushing through knee-jerk policy interventions – like trying to limit agricultural commodity exports and the like – could have negative unintended consequences on future production seasons, threatening South Africa’s food security in the long term.

“The appropriate policy action for the South African government should be a dose of ‘do‐nothingism’,” he said.

This “does not necessarily mean a complete inaction by the government,” he noted, but primarily refers to “a need to practice restraint from major policy interventions such as grain export bans, price caps and panic importation”.

Sihlobo said that South Africans should appreciate that the drought is unlikely to result in broad increases in food prices, with the risk mainly lying in white maize due to notable crop failures in the western regions of the country.

Current estimates put yields down 25% year-on-year. However, globally, yields are expected to be up 6%, mainly driven by yellow maize. The white maize issue is mainly a South Africa and Southern Africa issue, he said.

But aside from this, products that are playing favourably for South Africa are wheat and rice, which the country imports. There are currently ample supplies of these, and prices are moderating, Sihlobo said. Here, the rand exchange rate is the biggest factor at play in pricing.

Other products that have been driving food price inflation – like vegetable and poultry prices – are also showing positive signs. For vegetables, the high intensity of load shedding in 2023 is what led to many crops failing. In 2024, so far, load shedding has eased significantly.

For poultry, the Avian Influenza outbreak at the tail-end of 2023 caused significant damage, but anecdotal evidence points to sufficient restocking tacking place, Sihlobo said.

“Overall, there is increased uncertainty about South Africa’s consumer food inflation path for 2024. However, the underlying factors are not all one-sided, and one has to reflect on the price movements and weighting of various products when considering their food price forecast for the year,” the economist said.

“From a policy perspective, the best approach should be to do nothing. If fiscal space permits, support to the farmers, especially in the hardest hit areas would be appropriate.”

Sihlobo noted that the leadership at the Department of Agriculture, Land Reform and Rural Development is concerned about the impact of the drought on farmers, and is exploring various approaches to support small, medium and large farmers.

However, he reiterated the need for restraint on current policy.

“This approach will ensure continuous production in the next season and the long-term sustainability of our agricultural sector and food security.”

 

source:Don’t panic: Food security warning for South Africa – BusinessTech

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