(Adds Mozambique, editing)
By Ed Stoddard
JOHANNESBURG Aug 10 (Reuters) – Food inflation is taking
hold in southern Africa, putting pressure on some state budgets
and making it hard for central banks to loosen monetary policy
in the hunt for growth and jobs.
U.S. drought has driven corn prices to historic peaks, and
maize and wheat futures in South Africa, the continent’s biggest
producer, are at or near record highs, raising the stakes for
governments such as Mozambique that subsidise the cost of basic
food.
The price pressures constrain central banks in the region,
notably in South Africa, which is feeling the pinch from
economic stagnation in the euro zone, a major trading partner.
Already drawn to the region by attractive but waning bond
yields, foreigners may choose to pile in in greater numbers if
bubbling inflation contributes to higher returns.
Politicians, too, will be taking note, given the relative
size of spending on food in the average household’s budget and
the potential for hungry masses to take to the streets, as
happened two years ago in Mozambique.
Compared with the food price crunch of 2008, headline
inflation is still moderate, but looks unlikely to stay that
way, especially as the price of corn is felt across the food
chain in southern Africa, one of the few regions where the crop
is mostly grown for human consumption instead of livestock.
In South Africa, the continent’s biggest economy, inflation
was 5.5 percent in June compared to 11.6 percent at the same
point in 2008. It accelerated to 13.6 percent in August that
year.
Continued…
