Reports of an armed gang robbing a bread truck during a delivery in Harare, and making off with 500 loaves of bread, has focused attention on the plight of Zimbabweans who are facing severe hunger.
This followed earlier reports that the largest bakery in the country has closed several of its outlets as it was unable to bake bread due to the shortage of wheat flour and other ingredients.
The Lobel’s Bakery group announced at the beginning of July that it will close its bakeries in Bulawayo and Harare indefinitely, reducing production by some 50%. Lobel’s said the closures were unavoidable because local flour mills were unable to supply enough flour to bake bread. A second bakery, Baker’s Inn, has reduced its production by 80% since the beginning of the year, citing a shortage of wheat and daily interruptions in electricity supply as reasons.
Wheat millers, in turn, say they are unable to secure supplies of wheat due to the shortage of foreign currency to pay for imports. The Grain Millers Association of Zimbabwe (GMAZ) said in a statement that the organisation asked the Zimbabwean government to prioritise its request for foreign currency to pay for the import of wheat. GMAZ says in its statement that millers urgently need $12.5 million to pay for wheat awaiting transport from Beira, Mozambique.
Apparently, Mozambique refuses to release wheat before it receives payment. Previously, it struggled to payment from Zimbabwe.
Zimbabwean newspapers and other news services, such as ZimLive, have reported that the price of bread has doubled within a few days a week ago, if bread was available at all. An investigation by Reuters has found that bread is just about unavailable in most shops in the bigger cities.
The serious shortage of bread and other foodstuffs seems to be largely the result of bungling government policy, exacerbated by unfavourable weather conditions since late last year.
While the country continues to suffer the impact of Zimbabwe’s controversial land reform programme under previous president Robert Mugabe, the situation has been made worse by subsequent policies introduced by a government ignorant of basic economic principles. When prices of basic foodstuff started to increase, government did not realise, or denied, that it was due to its land reform policy that reduced supply.
Its response to the crisis of higher food prices and the growing inability of its citizens to afford food was to introduce price controls on basic foods such as bread. Most governments understand the political and social effects of hungry people. Most governments of poor countries have had first-hand experience of bread riots and know, at least, that even the French revolution in 1789 was caused by high bread prices.
More recently, the so-called Egyptian spring protest in 2011 and the current upheaval in Sudan were the result of hefty increases in the price of bread.
But the Zimbabwean government did not believe economic textbooks and decided to follow the tried and tested route to failure – that of introducing price controls to force companies to produce wheat, flour and bread at lower prices – with the effect that supplies fell even further.
It is a simple fact that nobody can, or want to, produce products at a loss.
As one baker in Zimbabwe was quoted in the state-owned newspaper: “We switched to baking rolls and other products that are not regulated instead of baking bread at a loss under price controls.”
True to basic economic principles, the staple food of the poor disappeared off the shelves when the bread price was set artificially low and the supply of bread rolls and confectionery excluded from price control increased to the benefit of the rich. Or in the (close to last) words of the last queen of France, Marie Antoinette: “Let them eat cake.”
Last week, the Bakers’ Association of Zimbabwe said that the official price of bread is $2, while most bakers apparently sell bread for $2.30. That price refers to American dollars, with the price much higher for anybody who wished to pay in whatever local currency Zimbabwe is using now.
In reality, the actual bread price is a moving target as the Zimbabwean government has recently declared that only the Real Time Gross Settlement Dollar (RTGS) are allowed as legal tender for all transactions, ignoring more economic principles. In this case, any currency only serves a form of payment if it is accepted by both parties to the transaction.
In other words, the academic definition of money is anything that is acceptable for the payment of goods and services or the settlement of debt. The RTGS dollar is not, despite declarations by the president, finance minister or its central bank.
In SA, 10 cent pieces and Kruger rands are officially both legal tender, but most retailers would not accept either a gold coin or 10 000 copper coins at the till.
Meanwhile, the Zimbabwean (or any other) government cannot force millers, bakers and shops to produce bread and sell it at low prices for worthless pieces of paper. Economic theory predicts that such a policy would lead to high demand, low supply and big shortages.
The Food and Agricultural Organisation of the United Nations warned some six months ago in a Global Information and Early Warning System report that Zimbabweans will face severe food shortage this year.
The report predicted that food insecurity will affect 2.4 million people in the country around March 2019 while waiting for the wheat harvest to reach the market.
This compares to 1.05 million hungry people in the same so-called lean season of the previous year. That 2.4 million people are now suffering from hunger is due to a lower maize crop and the shortage of foreign currency to either agricultural inputs or wheat and other staple foodstuffs.
The UN report warned that the 2018 maize harvest was around 21% lower than in 2017 due to adverse weather conditions and confusion around a new government policy to support small farmers. The UN comes to the conclusion that approximately 28% of the rural population would require humanitarian food assistance this year. Food assistance would also be required in towns and cities.
Another recent report, by the US Department of Agriculture (USDA), forecasts that things will get worse. The report predicts that Zimbabwe’s maize harvest will fall by another 53% in 2019 to only 800 000 tons, which “is not even half of what Zimbabwe consumes in a year”. This forecast tallies with forecasts by other researchers.
The USDA says it is unclear where Zimbabwe will get the maize supplies from as harvests in South Africa and Zambia, usually, Southern Africa’s biggest maize exporters, are also expected to decrease. South Africa is expected to deliver about 1.1 million tons for the export market, but this will most likely go to Botswana, Namibia, Lesotho and Swaziland.
The organisation also warns SA consumers that “these factors will most probably add upward pressure on prices in the coming months when the demand from Zimbabwe and Zambia intensifies, especially in the case of white maize”.