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South Africa Weighs Moves to Curb Food Price Impact

Source: Reuters
05/05/2008

Cape Town, May 5 - South Africa is considering introducing food vouchers and extending tax relief on basic foodstuffs to curb the impact of spiralling prices, Health Minister Manto Tshabalala-Msimang said on Monday.

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The minister said she hoped an "appeal to the conscience" of the food industry would be enough to rein in rising food prices, which have triggered protests across the world -- particularly in the world's poorest continent, Africa.

But if necessary, the government was prepared to impose new laws and market regulation to keep a lid on prices.

"If everything else fails, then we should begin to prepare legislation of some sort," Tshabalala-Msimang told reporters.

South Africa's government is concerned that rapidly rising food prices could put everyday items such as bread, milk and maize out of reach for millions of poor people.

Inflation for food items rose to 14.1 percent year-on-year in January, and South African unions warned of food riots similar to those witnessed in other African and Asian countries.

A special ministerial team was now studying various options to soften the impact of higher prices, including food vouchers for the poorest and extending the number of foods not subject to value-added tax, Tshabalala-Msimang said.

South Africa currently has a "zero rating" -- which eliminates value-added tax -- on items such as brown bread, fresh fruit and vegetables, cooking oils and fresh milk.

But officials still need to check whether such tax moves are an effective means of keeping prices under control.

"We need to do a little bit of an analysis on to whether, for example, brown bread is actually cheaper than white bread," Thami Mseleku, a senior health department official, told reporters.



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