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Threat of government interference in food pricing could lead to empty supermarket shelves

Agri SA will write to Minister of Agriculture, Land Reform and Rural Development, Thoko Didiza requesting engagement with stakeholders in the agricultural value chain on the implications of government’s stated intention of tackling food pricing. This follows the recent announcement by Minister in Presidency, Khumbudzo Ntshavheni, that cabinet has directed the Economic Cluster to put in place an action plan on food prices, food security and access to food. While Agri SA shares governments concerns about the rising cost of food, government interference in the market could lead to empty supermarket shelves.

Food price inflation remains high, but the latest Essential Food Price Monitoring Report released by the Competition Commission last week recognises that, while some input costs are decreasing, other critical inputs remain high as a result, for example, of loadshedding and rising fuel costs. This highlights the highly complex dynamics of the food system and how, if it wants to substantively address the situation, government can begin by fixing functions within its remit including fixing road and port infrastructure, reducing rural crime, and ending loadshedding.

Agri SA is mindful of the critical importance of the food chain for the country. For this reason, the theme of its 2023 Congress, which will be held on 13 and 14 October, is ‘Food Certainty’ which looks not only at food production, but also food accessibility, affordability, and safety amongst other elements. These themes merit extensive engagement as there is no simple or single solution to the multifaceted challenge of rising food prices.

Interference by government, however, is no solution to rising food prices. Rather, it demonstrates a misdiagnosis of the situation and is a reflexive reaction with significant potentially adverse consequences.

We know from historic examples globally that well-intentioned price controls can create market distortions. By reducing the profit motive of value chain participants, these measures can reduce innovation as well as the quality and availability of products and services.

It is also important to distinguish between short-term price spikes and long-term market dynamics, neither of which are best addressed through broad government interference, but rather require appropriately tailored solutions. In fact, knee-jerk reactions to short-term problems can have detrimental long-term effects.

Agri SA is therefore calling for a nuanced approach to all the factors affecting food prices, coupled with measured and well-crafted policies underpinned by sound economic principles. Any interventions must strike an appropriate balance between addressing the issues identified and preserving the advantages of a free and competitive market. Agri SA is willing and available to engage government on these issues so that together, we can protect South Africa’s food security.

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