Look at the drivers of retail prices, says BFAP

Because food prices are measured at retail level, more attention should be paid to Africa’s “exceptionally high” cost increases between food production and retail sales. More investment here could help to bring down food price inflation.

This is according to a study by the independent South African research organisation, the Bureau for Food and Agricultura Policy (BFAP).

The study looked at factors influencing food inflation in four African countries – Ghana, Kenya, South Africa and Zambia. It found a lot of similarities, with exceptions being South Africa’s electricity crisis and the fact that Zambia was the only one of the four that did not need to import wheat. Recent food price spikes in Ghana were caused by extreme exchange rate volatility.

It also looked at differences between the African countries and the rest of the world. Here, the study noted that a major driver of food price inflation in Africa was “exceptionally high farm gate-to-consumer costs for both imported and domestically produced commodities”.

Noting that “ultimately food inflation is not measured at the farm gate, but rather at retail level”, the BFAP welcomed recent research into this issue, following decades of focus on producer prices. It said that “evidence clearly shows that off-farm investments in the value chain can make a significant contribution to overall value chain competitiveness and consequently lower food price inflation”.

While many factors contributed to the final retail price, energy was a common driver in the processing of all agricultural produce.

“Energy costs influence the processing and transportation of food items.”

It noted that South African food value chains have been hit by the electricity crises that the country is facing.

“Alternative sources of energy are far more expensive at approximately four times the price per unit of electricity supplied, compared to the standard rates of the national grid. These costs eventually all filter through to consumers and overall food inflation,” the BFAP said.