Statement on Cabinet meeting of 9 October 2002

10 October 2002

Statement by Minister for Agriculture & Land Affairs, Ms Thoko Didiza

Cabinet at its meeting yesterday (9 October) examined various possible interventions to alleviate the impact of high food prices on the lives of all South Africans, especially the poor.

The government has decided on a mix of interventions, ranging from immediate relief measures for the poor to instruments of a medium to long-term nature that would help improve food security, transparency in the food supply chain and price stability. In that sense government is adopting a two pronged approach that deals with targeted social development interventions and market based initiatives.

The proposals were made in the context of a variety of research data on the trends in food inflation, its impact on poor households and the causes of high food prices. Among the main causes that have been identified are: the rapid depreciation of the Rand; oil prices; regional food shortages; and lack of competition in the supply chain beyond the farm-gate.

The measures proposed take into account the fact that some of the causal factors are in government's control and others not. This implies that whilst government will take the lead in facilitating interventions, all of society has a role to play.

It is critical that the measures we take are targeted at the problem of high food prices and that they are effective and sustainable. Government will closely monitor their impact to mitigate against possible unintended consequences.

Immediate to Short Term Direct Measures in Response to High Food Prices

Following on its call to the private sector to work for the reduction in the cost of food for the poor, Government has reached an agreement with Premier Foods for the introduction of a short term targeted programme to provide a non-branded 12.5 kg maize meal bag to be sold at a subsidised price of R25.99 per bag. Alongside with this packaging offer, agreement has been reached with METRO Cash and Carry to participate in the distribution chain to ensure that the product reaches the consumer at the consistent price of R25.99 [Currently, a 12.5kg bag of maize meal costs in the region of R45.75 to R47.39]. This measure, which we hope will be emulated by other milling and retail companies, will come into effect in the coming few weeks.

In order to improve the purchasing power of poor households, Cabinet has decided to place before Parliament proposed immediate increases in old age pension by R20 from R620 to R640, the Child Support Grant by R10 from R130 to R140, grant aid from R120 to R130, foster care grant from R450 to R460 and care dependency from R620 to R640. It is intended that these increases should come into effect this month (October). This will complement the intensified campaign to register all citizens who are eligible for social security grants.

The Departments of Social Development and Agriculture have been tasked to investigate the efficacy of a system of food stamps/vouchers.

Campaigns to provide Food Parcels to the most vulnerable households particularly in disaster areas, to encourage schools, community and household Food Gardens through the supply of Food Garden Production Starter Packs will be intensified.

As indicated on other occasions, government is considering the phased extension of the Child Support Grant to 14 years of age, and the enhancement of the School Nutrition Programme.

Medium to Long Term Measures

Investigations are being conducted on the re-establishment of Strategic Grain Reserves which would act as buffer stocks in times of food crises.

In consultation with other SADC countries on strategies for reducing food shortages in the region, South Africa will work towards encouraging the introduction of incentives for expanded food production in the region, as well as the lowering of food tariffs within SADC as part of its Free Trade Agreement.

Tariff regulations already in existence, which come into effect within particular domestic price ranges, will be applied more effectively and expeditiously. As in the past, this will be done in a manner that protects South African farmers from unfair competition.

Consideration will be given to encouraging co-operative milling in local areas, while ensuring that the benefits of such arrangements accrue to those local communities.

Transparency in the Food Supply Chain

In accordance with the Agricultural Marketing Act, government will immediately set up a food monitoring mechanism (Food Monitoring Committee) which will have the infrastructure and the authority to monitor the whole food production and supply chain, and ensure public awareness of, and appropriate publicity and debate around, retail prices and their relation to actual costs - and thus the mark-ups along the chain.

Noting the current system of VAT zero-rating of some basic foods, government will investigate the impact of the system - whether in fact the relief is passed on to consumers. This will inform any further action in this regard.

The Competitions Commission will be encouraged to continue with its monitoring of, and censure against, any acts of price collusion along the food supply chain.

Building Partnerships

As will be noticed from the aggregate of all these measures decided upon by Cabinet, some of them are immediate and others medium- to long-term. We do hope that the immediate measures will help particularly those households that are in dire need. In the long-term, we wish to ensure that extreme volatility in food prices is contained.

However, the effectiveness of these interventions, and the success of society's efforts against high food prices, will depend on all of us lending a hand. In this regard, government wishes to express its appreciation to Premier Foods and the partners [Metcash and AFGRI -Corporation Ltd], for the generous offer they have made in pursuit of the national effort to build a better life for all. We are confident that other companies will follow this example. We encourage them to work with the Ministry of Agriculture and Land Affairs to put the processes in place.

Further, we wish to encourage communities to establish and/or strengthen consumer organisations that monitor food prices. Consumer activism within our society is critical for us to ensure that the benefits of government action or of reductions in input and other costs are passed on to consumers.

We call on all South Africans to lend a hand in the fight for fair food prices.

Issued by: Government Communications (GCIS)

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