Nam food prices through the roof

By Timo Shihepo

WINDHOEK–NAMIBIANS are forking out more money to buy food as food prices continue to soar.

Unlike many parts of the world, where food and commodity prices are on a downward trajectory, food prices in Namibia increased by 12.4 percent during the 12-month period ending September 2016, a recent food index survey has revealed.

First Capital Treasury Solutions made the findings after researching the food prices in six of Namibia’s major urban centres. The First Capital Food Price Monitor uses a list of identical food items to determine the common food items being bought and consumed by average Namibians in all parts of the country.

The research paper published in September, found that Katima Mulilo is the most expensive town among major towns in the country. The survey included Windhoek, Keetmanshoop, Swakopmund, Ondangwa and Rundu. The capital city, Windhoek, ranks as the cheapest town in terms of food prices in Namibian towns. Ironically, Windhoek is considered one of the cities with the highest cost of living in Southern Africa.

“According to our findings, Windhoek is the cheapest with a cost of R1,201.67 for a basket of food items which can cost you R1,261.77 in Katima Mulilo,” said Milner Siboleka, an economist and assistant portfolio manager at First Capital Treasury Solutions.

Further research shows that the benefit of low global food prices where Namibia could have benefited was outweighed by the effects of drought, the hikes in electricity tariffs as well as the weak local currency.

To qualify these effects, Namibia experienced one of the worst droughts in history that affected food production. While supply remained weak, accessing cheap international goods to make up for the shortfall in supply came at high cost to Namibians due to the weak local currency.

“At the same time, electricity tariff hikes also weighed much on the food prices. As such prices continued to surge despite an opposite global picture,” said Siboleka.

Siboleka’s report further shows that prices of meat and poultry products increased by nearly 6.6 and 5.3 percent, respectively, by September, compared to the same period last year. The current drought is blamed as the main cause of the drop in livestock production, which is expected to continue dipping.

Maize-meal prices rose by above 0.11 percent between August and September 2016. Yearly figures show an increase of 12.1 percent in September 2016 compared to maize-meal prices during September last year.

The price index for milk products also recorded an increase of 10.9 percent from September 2015 to September 2016, but a small decline of 0.2 percent was recorded between August and last month.

Bread prices also surged as wheat prices increased. The price of bread increased by 0.3 percent in September 2016 compared to the price in August while on a yearly basis, an increase of 12 percent in bread prices in September 2016 was driven by an increase in wheat prices.

El Nino-related weather effects in the 2015/16 harvest year reduced global sugar production and as a result sugar prices increased by more than 17 percent during the period under review.

The price of rice dropped 0.6 percent between August and September 2016, although on an annual basis, an average price hike of 8.9 percent was recorded in September 2016.

Meanwhile, Simonis Storm Securities has warned Namibians to expect food prices to continue rising, as food inflation – mainly driven by demand and supply forces – is expected to continue its upward trend for the rest of the year.

This is due to a shortage of staple foods, such as maize and cereal, as a result of the severe and lingering drought.

“We anticipate inflation to remain relatively high and average at 6.5 percent by the end of the year,” said Purvance Heuer from Simonis Storm Securities.

SADC Comparisons

In the region, Namibia’s inflation mirrors that of South Africa, a case not surprising given that Namibia imports its inflation from South Africa through the more than 50 percent of goods that are imported into Namibia for consumption.