Capital Ethiopia Newspaper

It is not all doom and gloom

The recent price escalation of agricultural products amidst harvest season is out of the ordinary. This in fact has remained an irritating issue in the country, currently.  Ask anyone and he/she will respond to you that this is absurd and far beyond explanation.
Factors that led for agricultural price increase such as shortages of production, drought, fertilizer price hike, fuel price rise, salary increment and with minor effect international financial crisis are nonexistent. There has been fair distribution of rain fall in the rainy season. Price of fertilizer didn’t go up as compared with last year. The farmers claim that harvest was quite good this year.  Normally when things remain constant, it could be a factor for prices to remain constant too or show a certain level of reduction.  But prices are higher than ever before in a harvest season. It seems there are deeper forces driving prices to go up unchecked. 
This is a topic of debate at various levels in the society. But surprisingly, the issue is not raised by the people concerned such as Chamber officials.
One issue comes back again and again: with 11.2 percent official growth rate, it is said that the country’s economy is one of the fastest growing economies in the world. Let us assume that this is true despite the fact that the International Monetary Fund and other international institutions suggest the rate of growth is 7.5 percent. Why then is the fastest growing economy failing to provide local agricultural products at reasonable prices to the society? We raise this question based on one simple fact. When the country registered less than 11.2 percent economic growth, the market prices of agricultural products were by far below than what they are today.
What is interesting to note is that even people in government circles get confused and at loss of what to do when prices make a steady rise.  The Ministry of Trade in a recent announcement rebuked that the office will take strong measure against those who make arbitrary price increases. It condemned profiteers and speculators.
That doesn’t stop the price of Teff to go up to 1,350 birr in this harvest season at Merkato Ihil Berenda, the largest grain market in Addis Ababa. Not only Teff, but also prices of Wheat, Barley, chilly and green pepper, coffee and oil have all risen dramatically. Wheat and barley are now sold at 900 birr per 100 kg. Two months earlier the price of both items was 750 birr.
The price of vegetables such as cabbage, haricot bean, carrot, potato, tomato at the Piazza Market has also shown considerable increase. The price of chilly or green pepper has risen incredibly high to 30 birr per kilo from 15 birr a couple of weeks ago. In January this year, 17 kg of pepper was sold from 700 to 850 birr depending on the quality. Now the price has risen to 1,100 birr.  Pepper rarely climbs above 1,000 birr. Not to mention edible oil that is scarce on the market.
Well, this may be explained by the two- month long fasting season of the Orthodox Christians during which more vegetable and sesame oil is consumed. During the Orthodox and Catholic Easter fasting period, the followers, a sizeable number of the population, do not consume animal products. But items like meat, butter, cheese, egg and chicken whose prices are expected to reduce during this fasting season, have shown no sign of going in to that direction.
Traditionally, once prices go up they never go down here. Nor did regulatory directives bring prices down for long. People call for the interference of the government to regulate or stop the one directional price movement. Does regulation help stop price hike? This option has actually been tried and didn’t resolve the problem.
So now it seems we are in a vicious circle. On the one hand we call for regulation and on the other we argue that regulation doesn’t work. In addition, we are more and more connected with the rest of the world more than ever before. What happens in one part of the world impacts the other.
Hence,  when we go to the grocery we buy goods at the price of ‘globalization’. If we call for the government to protect us against such results, it may be difficult to do so. What can we do then?
The ideal situation would be a decline or at least a constant price tag during the harvest season. As once Prime Minister Meles Zenawi has put it in a clear language, prices of grains will never go back to where they were four or five years ago. Newly emerging ‘haves classes’ would tell you that this is capitalism where prices are determined by the market. In a free market, they (the haves) argue, prices are free to go up or down.
Still even in advanced capitalist countries we have seen government intervention to control prices by subsidizing or other. It is common to ask for protection or heavily lobby for it. In our case, let’s just say there are unfulfilled promises of enhancing the life of the population. The purpose of fast growth is just to meet that end. Yet with 11 percent of growth, we are not in a position to make production cheaper. So what shall  we do now? Shall we pull back the rate of the growth?
Still, I say it is not all doom and gloom. If the government acts fast and subsidizes one special item, fuel, the price of agricultural production could go down, for instance. Does the government have the courage or the appetite to do so? Officials have said ‘there will be no more fuel subsidy’. But we have seen time and again the words of government officials making a ‘U’ turn. A case in point: The day before the price cap put on several primary commodities was lifted in May 2011, a top official had reiterated with strong words that lifting the price cap is unthinkable. Well, the next day it was thinkable.
So let us hope that a certain key from the keyboard will be touched to make cereal prices once again affordable to the commoner.