Government suspends bread price hike, investigates supply chain – Mozambique

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Government suspends bread price hike, investigates supply chain – Mozambique

7:34 CAT | 01 Jul 2016

In File Club of Mozambique

The Mozambican government has decided not to authorise a rise in the price of bread.

On Wednesday, the Mozambican Association of Bakers (AMOPAO) proposed new prices in response to rising production costs. AMOPAO lamented that the costs of production have increased by seventy per cent, resulting in the closure of bakeries.

AMOPAO suggested that the price of a 200 gram loaf should rise from six to seven meticais, whilst a 250 gram loaf would go up from 7.5 to nine meticais.

However, the government has placed a temporary suspension on the proposal whilst a review of the supply chain is investigated.

A source in the Ministry of Industry and Trade told the daily newspaper “Noticias” that the AMOPAO proposal had caught the government by surprise. He told the paper that he is calling a meeting with AMOPAO and local millers.

On Wednesday, AMOPAO’s chairperson, Victor Miguel, explained that the cost of a fifty kilo sack of wheat had jumped from 1,080 meticais last October to 1,390 meticais in June. He added that increases in wages and the price of yeast have also affected production costs.

However, the country’s main union federation, the Organisation of Mozambican Workers (OTM), has strongly criticised AMOPAO’s use of wages as a factor. OTM stated that the increase in minimum salaries in April was a measure taken to restore the purchasing power lost by workers due to the effects of inflation, and could not be used as an argument to raise prices.

It also warned AMOPAO that rising food prices generate generalised dissatisfaction among the population and would have consequences.

The price of bread rose dramatically in October last year with AMOPAO imposing a 1.5 meticais increase for all types of bread. Thus, a 250 gram loaf went up in price from six to 7.5 meticais. Under the new proposal, this size of loaf would cost nine meticais – a fifty per cent increase in less than a year.

The main driver behind the increased costs is the depreciation of the metical. At the beginning of 2014, the US dollar was worth 30 meticais. Today the exchange rate is over 65 meticais to the dollar. Thus, while wheat prices over the last twelve months on the world market fell by almost 27 per cent when priced in dollars, import prices have risen in meticais.

Source: AIM