Botswana is likely to experience an increase in bread, sunflower oil, maize and fertiliser prices as supply chains are being disrupted by the Russia-Ukraine and the West’s economic proxy wars. Rising fears are that the intensifying conflict could disrupt trade and have significant consequences for global food stability. Gazette Reporters explore these developments in an atmosphere of already high local taxes and escalating fuel, electricity and transport tariffs
The SADC region can expect a ‘significant’ increase in the price of bread, sunflower oil and other consumer goods as soaring fuel and flour prices put unprecedented cost pressure on bakers, Wandile Sihlobo, the Chief Economist of the Agricultural Business Chamber of South Africa told The Botswana Gazette in an interview.
This reaction also comes after allegations that the country’s largest maize and wheat milling company, Bolux Milling, announced last week that it is intending to increase its product prices citing the logistical challenges of transporting due to the ongoing Ukraine and Russian conflict which has thrown the world into economic proxy wars. Bolux purported statement says it will increase its maize price by 17 percent, instant porridge by 5 percent, wheat by 16 percent, bread by 10 percent and confectionary by 5 percent. The company says Chobe Special Maize Meal, Chobe Maize Rice and Chobe Samp prices will go up by 12.5 percent. Bolux also warned its customers that under the current circumstances, there might be monthly price increases. But Bolux Milling, has dismissed claims that it is increasing prices and says a press release circulating on social media to that effect is false. The company’s Customer Service and Marketing Manager, Boitshepo David, told The Botswana Gazette that Bolux would direct communication of any price increases to retailers as their clients. However, an insider at Bolux confirms the statement and argues that, it was prematurely leaked hence that the statement has not been officially released yet but the company is engaged in internal discussions over the said contents.
In addition, since Russia is also imposing self-sanctions (limiting its exports to certain other countries), the supply of other commodities, such as corn and sunflower oil, will also be limited, causing a price increase in the world food markets. South African media reported that the Russian invasion sent prices of several essential commodities soaring, including edible oils such as sunflower oil, which was already in short supply over the last few years, after poor harvests of sunflower, palm, soya, and canola in crucial regions of the world. “Russia’s war is going to make South African kotas and slap chips more expensive,” the reports indicated. This arises on the backdrop of Botswana already experiencing severe shortages of potatoes in the market which has affected hospitality and restaurant industries.
In an interview, Sihlobo, the Chief Economist of the Agricultural Business Chamber of South Africa (Agbiz) and the author of “Finding Common Ground: Land, Equity, and Agriculture” explained that Russia and Ukraine are important countries to Africa as they are leading wheat and sunflower oil supplier to world markets. “Together, they provide 19% of the world’s barley supply, 14% of wheat, and 4% of maize, making up more than one-third of global cereal exports,” she said.
“We (Africa) import roughly over $4billion worth of agricultural products a year from Russia, and just over $2 billion worth from Ukraine. A large part of it is wheat and sunflower oil that we are getting from these countries. Which is why even at the start of the war on the 24th February, and indeed weeks heading towards that we started to feel the impact on the prices as the global market and essentially on the continent,” said Sihlobo.
BATSWANA PURSES SHRINK FURTHER, AND FURTHER
Back home, Batswana have to live through a more expensive life in 2022 as the economy wobbles towards recovery from the COVID-19 pandemic. The latest increase in goods and services was on the back of an increase in taxes to 14%, prices of transport fares by 12%, housing fees with hike effective April 1st.
Since last year prices in the country have been drastically increasing, on 01 April 2021 Botswana Power Corporation (BPC) increased electricity tariffs by 3 percent. As if was not enough, it is mulling to increase electricity prices by 5 percent in April this year for all its customers and further hike prices by 3 percent in 2023, in its bid to migrate to cost reflective tariffs and reduce reliance on government. Just last year alone, Botswana Energy Regulatory Authority (BERA) adjusted fuel prices five times with the latest increase happening in December 2021, it came in at P1.60, P1.65 and P1.75 on unleaded 93 petrol, unleaded 95 petrol and diesel respectively.
Despite these already high prices that Batswana are already facing, FNBB Quantitative Analyst Gomolemo Basele says there is heightened risk of companies continuing to adjust prices of goods and services upwards owing to the pressures being experienced. “These pressures include higher utility and fuel prices, which affect their cost of production and service provision,” he told the Botswana Gazette in a telephone interview.
Weighing in on the development, an economist from the University of Botswana Professor Brothers Malema said that there is a need for the country to develop a robust agricultural sector that will feed the whole nation and create significant employment.
“The issue of self- sufficiency with regard to producing reasonably enough food for the country does not have to await such a calamity to befall us,” he said in an interview with The Botswana Gazette. “A robust agricultural sector that feeds the nation and creates employment should be a significant motive for the country to pursue.”