The ANC’s next 100 years will be determined by what happens at its July 2012 policy conference in Mangaung and, more importantly, on the implications of this for the South African economy. Over the past 17 years, the ANC has not been convincing in its ability to make the economy work for the country’s majority, who remain economically disenfranchised and face daily hunger and malnutrition due to rampant food inflation.
Economic discussion documents, such as the National Growth Path, tell us little about a transformational economic policy and the strategic choices that our government is willing to make and which would mark a significant shift from the past. Macro-economic policy has remained the same – largely in the service of the markets – while micro-economic interventions are pursued with very few resources and little capacity to support them.
Delivery problems
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 hope that through rapid service delivery, it would survive the need for addressing underlying economic deficiencies. The ANC’s early years in government saw a spurt of service delivery, with the party seeking to expand services such as water, electricity, housing, healthcare and education to previously un- or under-serviced communities.
While these services reach significantly more South Africans now than during the apartheid era, their quality remains problematic. Moreover, general impoverishment has merely served to increase dependency on the state without creating viable local economies and jobs. It is in these local economies where the ANC appears largely unable to effect real change for the majority of South Africans.And local problems are the result of systemic issues, which stubbornly remain unresolved.
Food prices
Food inflation is a critical example of how systemic problems manifest themselves. Food prices provide a fair measure of the health of a country’s economy because multiple factors act together to determine prices. 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.
From 2010 to 2011, according to the National Agricultural Marketing Council, they varied between 10% and 15%. But for those who represented the poorest 30% of the population, food costs as a share of monthly income ranged from 35% to 37%, while the wealthiest 30% of people spent between 2% and 3% of their income on food.
General inflation last year was slightly over 6%, breaking through the Reserve Bank’s inflation target band of between 3% and 6%. Food inflation was the biggest contributing factor. A study by Logan Rangasamy published in the South African Journal of Economics of June 2011 shows that, between 2000 and 2008, food prices had the biggest inflationary impact of all goods.
Food consumption and pricing play a significant role in developing countries, because food is the main consumable in the basket of goods from which general inflation is measured. The study further shows that 88% of food price variation is a result of domestic, rather than international, influences. The main conclusion of the paper is that national policy has an important role to play in controlling food price inflation.
Priorities
What does this mean for the ANC at its policy conference, particularly in relation to economic policy? Firstly, service delivery protests reflect the erosion of income of households unable to put food on the table. Protests are a result of not having basic services or because basic services have been cut off, because people make the rational choice of putting food on the table rather than paying the water or electricity bill.
Secondly, urbanisation means that more people have to buy their food; rural subsistence agriculture no longer complements food security. This in turn causes a decline in income and remittances from migrant workers to rural areas, which affects food security in these areas and reduces the ability to sustain subsistence and even semi-commercial agricultural activities. The consequence is that both cash-based and non-cash means of food security are being strained.
Thirdly, fuel and electricity, which are key energy input costs, have increased by as much as 30% or more in the past two years. Households pay higher energy costs not only directly but indirectly, leaving very little flexibility for the purchase of decent food.
Monopolies
Fourthly, agriculture and food are subject to monopolistic practices by big agribusinesses 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. These 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 producing enough for our own needs.
Finally, the effects of food inflation also point to the fact that while there has been growth during certain periods of the South African economy with productivity improvements, wages have generally been repressed. Even with inflation, workers ought to cope with price increases if they have a fairer share of economic prosperity.
Thus, while the ANC celebrates its 100th year, it should not forget that a prolonged economic famine for the poor and the inability to put food on the table will increase social grievances. This will not bode well for the popularity of the ANC over the next 100 years.
Source: the South African Civil Society Information Service (www.sacsis.org.za).
The views expressed in our weekly opinion piece do not necessarily reflect those of Farmer’s Weekly.
