2016-05-20Staff Report 2 Windhoek Namibians can expect the price of food to continue rising, as food inflation - mainly driven by demand and supply forces - is expected to continue its upward trend for the rest of the year due to a shortage of staple foods, such as maize and cereal, as a result of the severe and lingering drought. Overall inflation was reported at 6.2 percent in April, compared to 6.3 percent in March, having shot up from 5.2 percent in December to 7 percent in February. However, despite the slight moderation in inflation, food inflation specifically soared to a four-year high of 11 percent in April, up from 9.8 percent in March. “We anticipate inflation to remain relatively high and average at 6.5 percent by the end of the year,” said Purvance Heuer from Simonis Storm Securities. He bases his assessment on currency-triggered inflation. “Imported inflation is expected to continue coming through moderately due to the weak Rand that we expect to prevail throughout the year. This would be more pronounced in the food and non-alcohol beverages categories. The rebound in the prices of energy commodities (such as fuel) are also expected to keep inflation high, particularly in housing and transport categories,” Heuer explained. He added that supply side constraints also continue to play a major role in determining food prices. “The water crisis and the 20 percent restriction imposed by NamWater are expected to reduce the production capacity of beverages in Namibia. We anticipate the shortfall to be imported, thereby increasing the degree of inflation in the country,” Heuer noted. Another factor contributing to the rapid increase in food prices is the weakening of the South African Rand against the United States Dollar. “Since South Africa is Namibia’s main trading partner, it has been importing much inflation from international markets. This has had a carry-over effect on the general level of prices in Namibia,” Heuer further explained. Capricorn Asset Management’s investment strategist, Suta Kavari, concurred with Heuer, saying the jump in food prices was largely in response to shortages in food as a result of the persistent drought and a weak Rand, which has made imports more expensive. One of the local products that has experienced an exceptionally high rate of inflation is chicken, which has seen prices rise astronomically compared to last year. Consumers are bemoaning the fact that they have to spend between N$60 and N$75 for a N$1.5 kg bag of chicken. At around the same time last year the same product was available for between N$40 and N$50. “We cannot afford to eat chicken anymore. It has just become too expensive,” complained a concerned customer at a local supermarket yesterday, as a 2 kg bag of chicken can now cost between N$65 and N$100, depending on which retail outlet is used. Last year the same size chicken bag could be bought for between N$60 and N$80. 2016-05-20Staff Report 2
