The national drought has intensified the urgent need for meaningful policy changes in the supply of food and water. A recent increase in wheat import duties, compounded by two interest rate hikes and a weakened rand, have left the poorest communities in the Eastern Cape reeling.
The combined import duties and VAT on a 12,5kg bag of flour, a basic ingredient of traditional foods and breads in the rural Eastern Cape, account for nearly 50% of the shelf price of the product. Considering that many rural households are maintained by pensioners, it is clear that this will adversely affect the economic wellbeing of the most vulnerable people groups in the province.
In an article by Bronwyn Nortje published on BD Live on 14 April, she reported that global wheat prices are down by 20% in US Dollar terms over the past 12 months, but up in Rand terms by nearly 18%.
This largely because of the depreciation of the Rand, means that South Africa has one of the highest wheat prices in the world and that consumers end up carrying the load of R 4,5billion in taxes and duties on wheat each year.
The increased duties have also severely constrained cash-flow for millers in the province, who import 95% of wheat inputs. Paramount Mills in East London employs around 600 people and is one of the largest employers in the regional economy. Hard hit by the recent spate of increases in the duties on wheat imports, its directors are in consultation with Government to review the existing variable tariff.
“The effect of the increased duties is twofold, compromising both local millers and downstream producers of wheat-based products,” says Paramount CEO, Bruce Spanjaard. “Local millers also lose volume owing to local confectioners who are able to import duty-free wheat-based products from Europe, causing local millers to be grossly outpriced.
“The knock-on effect of this ultimately leads to large scale unemployment in the milling industry. Our cash flows are under significant pressure owing to the additional R10,3million duty increase per month which is payable upfront by millers and only on 120 days by retailers.
“The consumer is having to foot this bill, which is having negative impact in local communities.”
Spanjaard adds that Paramount Mills aims to be instrumental in driving policy change at government level. “Ultimately, our consumers need someone to protect their interests and it is in our best interest to look out for them for our sustainability in the province.”