PMB’s inflation pain

2008-05-15 00:00

As South Africans battle to cope with double-digit inflation levels last experienced five years ago, an overview of Consumer Price Index (CPI) data shows that Pietermaritzburg has experienced above (national and metro) average inflation for 31 out of the past 34 months.

The latest data have revealed that inflation in the city came in at a whopping 12,1% in March 2008, 1,5% above the average rate in other urban areas and national metropolitan areas.

As a matter of additional concern, the gap between the local and national inflation rate remained significant during most of 2006 and 2007 — usually between one and two percent.

Only the North West province has a higher CPI inflation rate than Pietermaritzburg.

Although an extra one to two percent may appear tiny, this gap can translate into several thousand rands a year less in the pocket of an average Pietermaritzburg middle-income earner, compared with the average middle-income earner elsewhere in South Arica.

This will no doubt translate into less robust spending in the local economy during much of 2008.

The reason for the phenomenon is unclear, but it is obvious that it is not fuelled merely as a result of rapidly increasing food inflation.

Food inflation remains high in Pietermaritzburg, though, rising from 14,4% in February 2008 to 16,1% in March 2008.

Durban and Pinetown were worse off at 17,6% in March 2008.

Various national stakeholders have moved swiftly to acknowledge the food inflation crisis.

In some cases, they have even begun to search for ways to combat soaring food prices, which are now viewed as a global crisis.

Growth in maize and cooking oil prices continue to hurt consumers.

Considerable growth in producer prices of poultry, pork, beef, mutton, onions and cabbage during 2007 has also fed into consumer inflation numbers during the early part of 2008.

Although the agriculture sector has experienced a recovery in the recent past, the long-term view is that the sector is in decline, both provincially and nationally.

Critically, investment in the sector is waning as farmers contemplate the ongoing implications of land reform, security on farms and rising input costs.

This will no doubt place pressure on food production and ultimately food security in years to come.

Certain agricultural industry bosses have also warned that governmental food price regulations will not lower food prices.

FNB chief economist Cees Bruggemans noted recently that although favourable local harvest conditions have capped crop prices, export parity pricing may well pull local agricultural prices up even further.

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