A NEW YEAR OF ACTION (17.01.2008)

A new year of action seems to be dawning, especially for Cosatu, the South African Communist Party and the new leadership of the ANC, all of which overlap. They are gearing themselves up for mass mobilisation to demand the implementation of “pro-poor” policies, with the immediate focus being on the price of bread.

Ironically, perhaps understandably, given the furore that surrounded the recent price fixing scandal, the price of bread has decreased sharply over the past six weeks. The price of a standard white loaf, sliced and wrapped, has fallen 24.6 per cent from R5.95 to R4.49.

It may be coincidental, but over the same period, and following a row over the retail margins on milk, a litre of milk has come down from R6.99 to R6.49, a 7.2 per cent decrease. But such recent lowering of these prices is unlikely to mollify the unions, their political allies or consumer groups.

This month, for example, the millers and bakers — often the same vertically linked enterprises — are threatening a 30 per cent rise in the bread price because of the increase in the price of wheat. However, even with the recent drop in price, the same loaf of bread still costs 12.5 per cent more than it did in June last year when this column began the monthly monitoring of a basket of basic food items.

For consistency, prices monitored are for the same brands (starting with the cheapest in June 2007) at roughly the same time in the same supermarket each month. The store, being a leading chain in an urban area, can be assumed to feature prices lower than most townships or rural areas.

Over the eight-month monitoring period, the price of milk increased by a hefty 39.5 per cent, from R4.65 per litre to R6.49, having reached a peak price of R6.99 in November. But the largest increase recorded over the past month and over the eight month period, is for that essential: cooking oil. Back in June, a 750 ml bottle of oil cost R7.49, while two litres cost R17.99. This month, the prices were, respectively, R10.75 and R26.75, making for percentage rises of over the whole period of 43 per cent and 48.7 per cent.

Whole chicken, which increased in price in the run-up to Christmas, is now cheaper per kilo by 6.7 per cent, while a 2.5kg bag of the staple, mealie meal, is up by 15 per cent over the past month. It is now proportionately cheaper to buy the 1kg bag,, which has retained its R4.45 price tag.

The price of a block of margarine, which increased over the past month by 9.4 per cent, to R5.35, still shows a 33 per cent decline from the R7.99 charged in June last year.

What this means overall, is that basic food prices have risen by 4.5 per cent over December and by more than 18 per cent in the past eight months. This amounts to a significant reduction in the standard of living for most of the working population and not only what the unions call the working poor, the lowest paid employees.

This fact, coupled with the impression that bread and milk prices declined following fairly widespread protests is likely to encourage the planned mass mobilisation campaigns. However, many of the prices are subject to pressures beyond the desire for greater profits.

The oil price and the consequent increase in the cost of liquid fuels and, therefore, transport, is a major factor. What this should do, is also increase the demand already made by Cosatu, for the nationalisation of Sasol.

When this fuel-from-coal entity was in public hands and the oil price was around $10 a barrel, Sasol, producing at perhaps $30 a barrel equivalent, was heavily subsidised by the same taxpayer constituency who are now paying most heavily for fuel price hikes. Only when Sasol became profitable in 1979 was it privatised.

Now, with more efficient technology Sasol — it produces roughly 40 per cent of the country’s liquid fuel requirements — probably makes fuel at an oil cost equivalent of R26 a barrel, making it hugely profitable. The argument that such benefit should accrue to the public at large and not to private shareholders is a strong one and seems certain to be made.

It appears to make more sense than mobilising simply to demand price reductions in the face of global market realities.

*Originally published 08/2008