Johannesburg - Grain South Africa yesterday dismissed claims that the recent increases in the wheat import duty would fuel bread price increases, saying local bread companies had continued to increase prices even as international wheat prices fell.
Grain SA’s dismissal of the link between a possible bread price increase and the imposition of the tariff counters criticism that the government’s protection of local producers had come at the expense of consumers.
Read: Wheat tariff 'should not result in steeper bread price'
Chief executive Jannie de Villiers said lower international prices of wheat should have brought down bread prices in the past few months, but companies had increased their prices. He said when the international prices of wheat decreased towards the end of last year, local millers did not decrease their prices.
“In fact, the price of bread continued to increase. They benefited from low international prices. They cannot increase the price of bread simply because government is taking that benefit away from them. We are not saying they cannot increase the price of bread because costs such as transport and electricity have gone up,” De Villiers said.
He said the wheat price was only 18 percent of the bread price. “That is about four slices of a loaf of bread. The rest is for other costs in the value chain such as storage, milling, transportation and other costs.“
De Villiers said the wheat price was sometimes used as an excuse to raise the bread price. “The… import tariff system was approved in 2013 by Rob Davies, the Minister of Trade and Industry, following a long… investigation by the (International Trade Administration Commission of South Africa).“
Statistics SA said monthly food prices showed that the price of a loaf of white bread (700g) increased from R11.88 in November to R11.90 in December. By February, a loaf of white bread was R12.39. “How could this be when the price of wheat had been decreasing?” asked De Villiers.
Last week the Treasury raised the wheat tariff from R911.20 a ton to R1 224.31 a ton. Grain SA, which represents wheat growers, has been putting pressure on the government to increase the tariff.
But the Treasury said it was concerned about the impact of the higher import duty on wheat on the price of bread and other staple food, but also said it was mindful of the need to ensure policy certainty, food security and the financial health of the farming industry.
Tertius Carstens, the executive for essential foods at Pioneer Foods, said yesterday that the company had no intention to increase the bread price in the short term. “From time to time, Pioneer Foods reviews the selling prices of its products based on an assessment of all input costs inclusive of factors such as a specific duty embedded in the price of the raw material or service. Our most recent bread price increase was implemented at the beginning of this month at an average of 4.5 percent across the basket of products,” he said.
Foodcorp declined to comment on the possible effect of the wheat import duty on bread prices, while spokesman Stephen Heath referred queries to Grain SA.
Meanwhile, Cosatu yesterday condemned the duty increase and said the Treasury should reverse the decision and come out with a more pragmatic approach that would protect the poor.
Cosatu spokesman Sizwe Pamla said: “The government must find alternative ways to protect the agricultural sector from cheap subsidised imports. This must include a special attention to emerging farmers and labour intensive farms.”
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