Ianit Chernick
JOHANNESBURG: As food prices continue to soar, consumers may be hit with yet another spike – this time it’s the turn of cereals and bread.
The price of a standard loaf of bread could rise by between 90c and R1.60 following the Treasury’s announcement that the import duty on wheat and wheaten flour would increase from R911.20 to R1 224.31 per ton.
University of the Free State head of agricultural economics Professor Johan Willemse told Cape Times sister paper The Star yesterday the wheat import duty was based on a formula the industry and the government agreed on several years.
“A reference price of $294 was agreed on. As soon as international price drops below this level, an import duty is triggered. This is what happened on Friday.
“The import duty of R911.20 was established in September and it has now been adjusted to R1 224.30 per ton, which is an increase of R333 per ton,” he said.
Willemse said wheat is about 20 to 25 percent of the cost of bread.
“The rest is electricity and fuel. Both are up by nearly 10 percent… therefore we expect bread prices to increase in the next few months by 10-12 percent,” he said.
However, Grain SA said the perception that the wheat import duty increase will up the bread price by 10 percent is incorrect.
“The wheat price is only 18 percent of the bread price and is sometimes used as an excuse to increase the price of bread,” Grain SA said in a statement yesterday.
“The current import tariff system was approved in 2013 by Minister of Trade and Industry Rob Davies following a long and very thorough investigation by International Trade Administration Commission of South Africa (ITAC).
“It was a system implemented to enhance wheat production and food security in the long term, and not just a haphazard decision.”
Grain SA chief executive Jannie de Villiers said once the import duty, which was supposed to be in place since December, is announced, it will remove the benefit the importers enjoy.
“It should not increase the price of bread… It will be a setback to the consumer if opportunistic behaviour results in an increase in the price of bread,” he said.
Last week it was announced that the price of milk and dairy products would increase by at least 60c next month.
The Treasury said on Friday that it was reluctant to put the tariff up because grain products such as bread were staple diets in poverty-stricken homes.
“The ministry of Finance is particularly concerned about the impact of the higher import duty on wheat on the price of bread and other staple food, but also mindful of the need to ensure policy certainty, food security and the financial health of the farming industry,” the Treasury said.
Cosatu has condemned the increase in the import duty.
“The federation is worried because bread is a stable food of most poor households, who are already taking a serious strain from the escalating food prices,” Cosatu said.