Windhoek
Namibians will wake up to a much more expensive world on January 26 after leading food manufacturer Namib Mills yesterday announced stiff price increases in all of the company’s product categories on that date.
The price increases are due to the sudden devaluation of the Namibian Dollar (NAD) against the American Dollar (USD) and other major trading currencies, the company said. According to the CEO of Namib Mills, Ian Collard, the price of maize – the staple food of Namibians – will rise by 10 percent, while the price of mahangu will shoot up by 20 percent. An even bigger upward adjustment of some 23 percent will be added to the price of rice, while the price of sugar will rise by 15 percent.
The price of wheat flour will jump upwards by six percent, making life for the poor much harder at a time when government is already distributing food aid to hundreds of thousands of people affected by the drought, caused by adverse weather conditions.
“Due to the fact that most soft commodities are exposed to the exchange rate, the sudden weakening of the Namibian Dollar against the United States Dollar has made raw materials of the above products considerably more expensive. Pressure of the drought in southern Africa had increased maize prices dramatically, as supply dwindled under the dry conditions,” Collard stated. “The company has, however, procured enough maize for the anticipated usage until the end of June 2016, but is still exposed to volatile pricing as currently on SAFEX, the commodity exchange in South Africa, prices skyrocketed with N$514 per tonne in the second week of December over a period of five days.
This was an increase of 15%. Prices even increased further over the festive season, testing levels of N$5 000 per tonne…” Collard further said.
According to him, current levels for white maize ex-Randfontein in South Africa are around N$4 600 per tonne, compared to N$3 300 a short while ago. The sudden increase is mainly due to the persistent drought and the weakening of the Namibian Dollar. He says the increase in the sugar price is mainly due to the drought currently experienced in South Africa (specifically Kwazulu-Natal), along with the weaker Namibian Dollar. Rice prices also increased due to the weakening South African Rand to which the Namibian currency is linked.
“The local drought in Namibia resulted in a very small mahangu harvest, which necessitated imports from abroad. There is also a certain scarcity of the product, as the only excess mahangu producing country is India,” said Collard. “Wheat prices are currently quite cheap in USD terms, compared to the recent history; the reasons being that Eastern Europe and Russia have been coming on -stream over the past few years regarding constant wheat supply. This, along with very competitive shipping rates due to the downturn in the world economy, made wheat rather cheap in historical terms.
Unfortunately prices start to jump as soon as they are converted from USD to NAD.
“Although the world is also expecting a bumper crop on maize, in the region of 970 million tonnes, unfortunately the greater bulk of this harvest is yellow maize. Yellow maize is not utilised for human consumption in southern Africa, including Namibia.
Our markets utilise white maize for human consumption, of which the world harvest is ±70 million tonnes. Regrettably, Namibia and South Africa were hit very hard with a drought this season, adversely affecting the production of maize,” the Namib Mills CEO said.