chrislbecker.com

Fin24.com reports:

Durban – Already cash-strapped and struggling to put food on their tables, consumers have been facing food price increases significantly higher than the inflation rate, the Mercury reported.

According to the latest Food Price Monitor report, costs of even the most basic foods have increased by up to 56% in just one year.

From April 2011 to April 2012 the prices of basic food items like milk, bread, margarine, rice, maize meal and meat rocketed, with the poorest being the hardest hit.

Urban consumers paid R8.23 for a 700g loaf of brown bread and R9.19 for a loaf of 700g white bread during April 2012 – increases of 12.74% and 11.66% respectively, compared with the same time last year. The price of 5kg of special maize meal leapt by 56.01%.

The Reserve Bank has a very blunt tool it uses to create and ‘control’ price inflation. It has a printing press, and a fireplace. It prints and destroys money to control the value of the Rand over time, and in turn, prices in the economy.

The problem with this is that those products that are comprised more of raw inputs, like basic foodstuffs, rather than knowledge and productive efficiencies, like technology products, are driven up more in price when the currency is devalued. While entrepreneurs find ways to keep costs down for consumers, by using less materials to build a computer, for instance, farmers produce food by the kilogramme and people eat food by the kilogramme, entrepreneurs can keep prices down, while still improving the product. Farmers can’t compete with this. When it comes to consuming food, the only way to really keep costs down is for people to consume less.

But when entrepreneurs find ways to make their product prices fall, the Reserve Bank responds by printing more money, which fuels the price inflation of food prices even further. This is where we are today, and it is about to get much worse.