The current rise in commodity price shows no signs of receding as markets are expected to enter into a slowdown mode. Goods are to remain highly priced, writes ALI TWAHA.
The long dry spells and high fuel pump prices are all driving retail food prices to their biggest annual increase at a time when one of Uganda’s regional markets, South Sudan, remains shaky as a result of political unrest.
As a result of the increasing commodity prices on the market, cash-strapped consumers and some traders are lately finding it difficult to pay for meals as the prices of key ingredients such as sugar shoot through the roof.
“The whole year has been drought-prone. The rains have not been persistent and agriculture has not performed to expectations. So, it created a shortage in food supply,” says Dr Fred Muhumuza, an economist working with the Financial Sector Deepening Project Uganda.
For instance, Salim Jamadah, a trader in Nakasero market, is among those who have stopped selling commodities such as sugar to customers due to recent hikes in prices.
“I stopped selling sugar three weeks ago. A kilogram goes for Shs 5,000 [up, from Shs 3,200]. It’s a lot of money which I don’t have at the moment [to get stock],” Jamadah says.
At Nakasero market, it’s not business as usual, according to Jamadah, despite it being the busiest season in the year for the traders.
Jamadah says “consumers are tight on their money and they are spending sparingly” because the highly-priced goods have weighed down on their consumption power. His frustration with the current state of doing business cuts across with other traders we interviewed for this story.
The traders throw the blame of high prices on Ugandan traders exporting food to neighboring countries such as South Sudan. However, experts are now worried that the food shortages in Uganda, especially in the northern region, have peaked and created a situation of extreme poverty.
Recently-released statistics from Uganda Bureau of Statistics (Ubos) indicate that poverty indices for northern Uganda have worsened over the past 12 months, with 23.9 per cent of households being classified as chronically-poor.
SOUTH SUDAN IMPACT
The current food shortage in Uganda has been worsened by the unrest that resumed in the world’s youngest nation, South Sudan. According to a statement from the European Commission, nearly three million people have been displaced, causing a crisis situation. Uganda alone now hosts more than 30,000 refugees who have escaped the fighting that intensified in July.
“Most food is channeled to the refugee camps in South Sudan; so, it’s straining the little that is available in the market,” Muhumuza explains.
“In South Sudan, people had started growing food on their own but now Uganda has to feed all those people. Those who have remained in Juba can’t grow food [because of the unrest]. So, we do not see any change in the next quarter of 2017.”
A combination of the long dry spells and the refugee influx from South Sudan has sparked an increase in commodity prices of items such as maize flour, which has gone up to Shs 2,500 from Shs 1,800, rice (Shs 2,400 to Shs 3,000 Kaiso) and beans (Shs 2,000 to Shs 2,900 Nambaale).
Meanwhile, economists expect inflation, the change in the prices of goods and services, to rise further because of higher fuel and food prices. In May, 2016, pump prices dropped to their lowest level over the last five years, averaging about Shs 3,150 for a litre of petrol and Shs 2,450 for diesel. The drops were then attributed to the fall in global oil prices.
However, prices have since gone up, with a litre of petrol now going for Shs 3,450, while diesel trades at Shs 3,010. The cost of transporting food from farms to the market influences the price of food.
While presenting the monetary statement for November, 2016 recently, Bank of Uganda (BOU), said annual headline inflation rose to 4.6 per cent from 4.1 in October 2016, driven by a sharp rise in food crops and related items.
Emmanuel Tumusiime-Mutebile, the BOU governor, said inflation picked up due to bad weather. He, however, said the rate is expected to stay within single digits and the medium-term target of five per cent.
“Inflation is focused to remain around the medium-term target of five per cent over the next 12-month,” Mutebile said.
Adam Mugume, the executive director of research at BOU, explained that the food prices are expected to rise but the harvesting time is projected to lift commodity prices in the first quarter of 2017.
“Food pricing is temporary phenomenon,” Mugume explained. “We are likely to see further increases in food supplies. So, as those food prices start edging lower because of the good harvest that we expect in the first quarter of 2017, obviously that will have an impact.”
PRICES TO PERSIST
On the other hand, Muhumuza says although inflation is expected to slow down in 2017 as effects of drought ease, high food prices might persist for commodities such as beans, grains and maize flour.
“A lot of schools may buy food because they normally stock food in January, which might push prices up a lot more.”
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