‘Food prices hike needs in­come in­crease’

Lesotho Times - - Business - Bereng Mpaki

A STUDY con­ducted by the Food and Agri­cul­ture Or­ga­ni­za­tion of the United Na­tions (FAO) in­di­cates that vul­ner­a­ble house­holds in Le­sotho need an in­crease in in­come to cope with soar­ing food prices.like other south­ern African coun­tries, Le­sotho has been hit hard by the El Niño-in­duced drought that has trig­gered a rise in ce­real prices in the re­gion.

Ac­cord­ing to the re­port, which was pub­lished in May 2016 and ti­tled “Im­pact of food prices in­crease among the poor­est”, the spike in ce­real prices had been com­pounded by the de­pre­ci­a­tion of the value of the South African rand.

“The cur­rent drought in­duced by El Niño is in­creas­ingly af­fect­ing coun­tries in south­ern Africa, es­pe­cially South Africa, which is the main source of ce­real im­ports for Le­sotho,” reads part of the doc­u­ment.

“Whole­sale prices for ce­re­als are in­creas­ing in South Africa and are likely to be trans­mit­ted to Le­sotho in the short-term. Sec­ond, the cur­rent de­pre­ci­a­tion of the rand, to which Le­sotho’s Mmaloti cur­rency is cur­rently pegged vis-à-vis the US dol­lar, will make im­ports from other coun­tries more ex­pen­sive.”

Us­ing data from the house­hold sur­vey car­ried out to eval­u­ate the im­pact of the Child Grand Pro­grame (CGP) - an un­con­di­tional so­cial cash trans­fer for poor and vul­ner­a­ble house­holds as a ba­sis, the study shows that the poor­est house­holds would be di­rectly af- fected by the price hike. Ac­cord­ing to its orig­i­nal de­sign, the CGP trans­fer pro­vided the equiv­a­lent of about 20 per­cent of the monthly con­sump­tion ex­pen­di­tures of an el­i­gi­ble house­hold.

“The price in­crease had very di­verse im­pacts on dif­fer­ent so­cio-eco­nomic groups. The di­rect and first-or­der im­pacts of the price shock were borne dis­pro­por­tion­ately by the poor­est and least en­dowed house­holds,” the re­port fur­ther reads.

“As for the pos­si­ble pol­icy mea­sures to con­trast the im­pacts of the cur­rent price surge we ob­served that, in or­der to main­tain house­hold util­ity un­changed, every per­cent­age in­crease in the price of ce­re­als would need to be matched by a 0.4 per­cent in­crease in in­come.”

It con­tin­ues: “If in­creases in to­tal in­come would have to come only from the ex­oge­nous com­po­nent given by the cash trans­fer while other sources re­main sta­ble, the amount of the cash trans­fer would have to in­crease by two per­cent for every per­cent­age point in­crease in the price of ce­re­als.”

The re­port notes that the in­crease reg­is­tered thus far, since De­cem­ber 2015, in the re­tail maize price, was ap­prox­i­mately 15 per­cent at the na­tional level, “which calls for an in­crease of al­most 30 per­cent in the amount of the cash trans­fer.”

The study also found that poor house­holds spent around 65 per­cent of their in­come on food and 20 per­cent of this amount on veg­eta­bles.

“This con­firms the ad­e­quacy of com­ple­ment­ing cash trans­fers with home gar­den­ing kits. The home pro­duc­tion al­lows fam­i­lies to save on ex­pen­di­tures on veg­eta­bles and al­lo­cate more cash re­sources to the pur­chase of sta­ple food and other com­modi­ties.”

To mit­i­gate the im­pact of the pre­vail­ing drought and food prices in­creases, FAO is sup­port­ing the Min­istry of Agri­cul­ture and Food Se­cu­rity and the Min­istry of So­cial De­vel­op­ment to com­ple­ment the CGP with home gar­den­ing and nu­tri­tion ed­u­ca­tion.

FAO has so far re­ceived funds from the Euro­pean Union (ECHO – Euro­pean Com­mis­sion Hu­man­i­tar­ian Aid and Civil Pro­tec­tion Direc­torate) and the UN Cen­tral Emer­gency Re­sponse Fund (CERF).

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