Cosatu statement on Bread prices 03-08-07

Bread prices

The Congress of South African Trade Unions is shocked at the news that Albany Bakery is to increase the price of its bread by 45c a loaf from next Monday. The effect on the poor will be devastating.

Other firms are expected to make similar increases, though they are likely to announce it separately, since the last time the three big companies - Albany, Sasko and Blue Ribbon - simultaneously announced price rises in December 2006, a Cape Town independent bread distributor referred them to the Competition Commission, which is still to rule on his accusation that there was collusion and price fixing.

Albany claims that it is faced with a dramatic jump in wheat costs. The local wheat price has indeed rocketed, from R1 500 a ton this time last year to R2 850 a ton now. It has risen by more than 43% already this year. In the month of June alone wheat prices went up by 10%.

The poorest consumers are already reeling from maize going up more than 50% so far this year, by 5% in June alone. The rises in wheat and maize are having knock-on effects on meat and dairy products and processed food. Overall local food inflation is over 9%, well above the general level of inflation, and this latest bread price rise will push it up even further.

The biggest problem is that the biggest price rises have been in products which form a high proportion of the regular expenditure of the poorest consumers, on products like bread and mealie flour.
Among the reasons given for the rise in wheat prices are the high oil price, the big growth of grain exports to China and the scramble by the US and Europe to source bio-fuels from maize and wheat, all of which have led to a global rise in demand for cereals and therefore in wheat prices.

If this last reason is true it confirms the fears already expressed that using grain for fuel would inevitably lead to price increases which could be permanent and risk putting essential food products beyond the reach of poor consumers, as supplies are channelled into the bio-fuel industry.

All this exposes the grim reality of the capitalist market economy. Rather than grow food and produce other goods to meet the needs of the people, production is for profit. There is no real free competition. What happens between Sasko, Blue Ribbon and Albany locally mirrors the collusion and price-fixing that takes place when the prices of wheat and other cereals are fixed internationally at the futures exchange in Chicago.

The South African government must intervene to regulate the market, by pegging the price of bread and other essential foods, while conducting an inquiry into the way the industry is dominated by three companies and examining the possibility that they are operating as a monopoly or cartel in order to keep prices high. At the same time they must promote the expansion of food production, particularly through by making more land available to the majority communities and through cooperatives.
COSATU unions will use the latest food price rises to intensify its struggles for substantial pay increases that compensate workers for the rising cost of these basic necessities.

Patrick Craven (National Spokesperson)
Congress of South African Trade Unions
1-5 Leyds Cnr Biccard Streets
Braamfontein, 2017

P.O.Box 1019
Johannesburg, 2000
SOUTH AFRICA

Tel: +27 11 339-4911/24
Fax: +27 11 339-5080/6940/ 086 603 9667
Cell: 0828217456
E-Mail: patr...@cosatu.org.za