Financial Times: City dwellers priced out of the market

Javier Blas in Addis Ababa

Yeshi Degefu stopped eating meat about a year ago. Vegetables followed soon and, more recently, chickpeas and lentils. Today, Mrs Yeshi, 50, of Addis Ababa, queues for subsidised wheat, the only food she can still afford.

“In the past year all food prices have jumped,” Mrs Yeshi says at the Gojjam Berenda grain distribution centre in the Ethiopian capital. “Everything is much more expensive.”

Mrs Yeshi is caught up in a food crisis that is hitting the urban population rather than the rural poor, the group that has in the past faced the greatest threat of hunger. This time, the problem is not a shortage of food but its price.

The spread of the crisis to the cities is particularly unwelcome for the governments of developing countries because urban populations are more likely to protest, triggering riots which in Africa have already hit Burkina Faso and Senegal.

The emergency has few precedents: only Indonesia and Mexico suffered price-related food crises in the 1990s. In the past, hunger has been linked to natural disaster, such as drought, conflict or extreme poverty, rather than rising prices.

Josette Sheeran, the executive director of the World Food Programme, says the crisis is the “new face of hunger” affecting urban areas. Rising prices, she says, mean that “people in the cities which just eight months ago did not need food aid need it now”.

Ms Sheeran says food prices in the cities are rising much faster than wages, squeezing purchasing power. “We see food on the shelves but people are unable to buy it,” she says at the distribution centre where wheat is less than half the price paid at the city’s markets.

The International Monetary Fund says the “social implications of rising food prices can be severe”, warning that “food price-related riots” could spread.

“These pressures pose new challenges for African policymakers and will have particularly adverse effects on the poor,” the IMF says.

Food aid officials say that the urban middle class is not yet suffering from hunger, but warn that because of rising prices, families are cutting every other expense, including education and health, in order to cover their monthly food bill. A varied diet makes way for reliance on the staple.

The evolution of food prices in Ethiopia is illustrative of the trend in urban areas across emerging countries. The price of wheat in Addis Ababa has surged 32 per cent since last summer, while that of lentils has jumped 73 per cent and maize 47 per cent in the same period, according to the WFP.

In the five years to 2007, food prices in Ethiopia have soared by 62.3 per cent. The jump is significantly faster than non-food prices, says the WFP, “suggesting that those involved in [the] non-food sector of the economy, predominantly the urban population, have become relatively poorer over the last five years”.

In the Ethiopian capital’s grain market the mood among traders is gloomy as prices continue to climb. “This is the new gold,” says Yosef Yilak, a trader, showing in his hands teff, the indigenous grain used to make Ethiopian injerra, or flat bread. “Demand outstrips supply,” he says.

The developing crisis in the grain markets of the main cities led the Ethiopian government to create a grain stabilisation programme in April last year. Although the scheme initially covered just the capital, distribution centres now operate in 12 other cities.

Berhane Hailu, the general manager of the Ethiopian Grain Trade Enterprise, which runs the programme, says that an estimated 4m people in urban areas benefit from it.

Governments across the world are taking similar measures and also lowering food taxes and slashing import tariffs for agricultural commodities in an effort to control local food prices.

But Trevor Manuel, South Africa’s finance minister, says that one of the tragedies of the current crisis is that there is no short-term solution and even some of the policies now being implemented in several countries could backfire.

“Few systems work. In the past it has been demonstrated that subsidies, strategic stockpiles or vouchers for foods all create some problems,” Mr Manuel told the Financial Times on the sidelines of the African Union finance ministers’ meeting.

As Mrs Yeshi waits to buy subsidised wheat, the policy talks mean little. Her only concern is that she “can no longer feed the children”.