Price of bread to go up

From fuel and electricity to milk tariff increases, the latest essential item to see an increase in price is bread. This staple is set to increase by an estimated 10 % following Treasury’s announcement of the increase in the wheat import duty last week.

“After careful consideration, the Ministry of Finance has decided to approve the implementation of an amendment to the import duty (tariff) on wheat, in accordance with the current variable import duty formula. At the same time the Ministry of Finance has proposed to the Minister of Trade and Industry that he consider instituting a request for an urgent and accelerated review of the variable tariff formula by the International Trade Administration Commission of South Africa,” stated Treasury.

Further concern was expressed as the Ministry of Finance remains concerned about the impact of the import duty on the price of bread and other staples.

Grain SA, however, are of the opinion that this could have been averted had Treasury decreased the price of bread in December last year, subsequent to the lowering of international wheat prices at the time.

“The importers of wheat benefitted ±R313 per ton on the 608 126 tons (R190 million) following the delay in the announcement by National Treasury. According to the Stats SA bread price survey to calculate the inflation, the price of bread increased over this time. Once the import duty - which was supposed to be in place since December - is announced, it will “remove” the benefit the importers enjoyed. It should not increase the price of bread,” remarked Jannie de Villiers, CEO of Grain SA.

De Villiers further noted that the bread price only comprised 18% of the wheat price, and is sometimes incorrectly used to increase the price of bread.

The current import tariff system was approved in 2013 by Minister Rob Davies, Minister of Trade and Industry, following a long and very thorough investigation by ITAC. It was a system implemented to enhance wheat production and food security in the long term and not just a haphazard decision, noted Grain SA.

It is in this light that Grain SA initially applied to the International Trade Administration Commission in December for a wheat tariff increase.

“After waiting over three months without any outcome, Grain SA sent a lawyer’s letter to the Treasury to demand that the automatic wheat formula be implemented.

“The Treasury and Grain SA officials met on Tuesday last week, but Grain SA officials were not satisfied with the outcome and lodged an urgent application in the High Court the following day for the tariff increase to be announced. Grain SA applied for a higher tariff on the basis of the fall in the global wheat price. The Treasury then announced the tariff increase from R911.20/ tonne to R1,224.31/tonne, which will apply for the rest of this year,” reported Business Day.

The view that the increase in the wheat import duty to be announced will increase the bread price by 10%, is not correct. It will also be a setback to the consumer if opportunistic behaviour results in an increase in the price of bread, added Grain SA.

Such an increase in an already difficult economic climate could have dire effects, especially for the poor who are already for the most part, increasingly struggling to make ends meet.

The news comes as Treasury also faces the added challenges around increasing the price of staples in a municipal election year.

Last week we also covered the milk price increase – for more, click here.