Lifting of import taxes fails to reduce food prices

Almost two months after the government lifted import taxes on rice, flour and fish in response to riots caused in part by high food prices, consumers are still paying the same, and in some cases more.

“We are fighting to ensure prices remain low while operating within the constraints of a free market,” the spokesman for the minister of trade, Alphonse Ateba Ndoumou, told IRIN.

The 5 percent import tax was lifted on 7 March after the government made a deal with wholesalers. “They agreed to lower prices if we lifted taxes,” Ateba Ndoumou said.

“The problem now is the retailers,” he said. “They have not respected the deal.”

The government closed down 50 retail shops in the commercial capital Douala and the capital Yaoundé which were selling rice at the old price. But retailers with whom IRIN spoke said they were still waiting for the wholesalers to drop their prices.

“The government can’t make us sell at a lower price until we can buy at a lower price,” a rice retailer in Douala’s central market, Jean Marc Mbarga, told IRIN.

Whoever is at fault, prices controls are not going to work, economists in Cameroon told IRIN. “Prices cannot be set by decree,” said economist Hozier Nana Chimi, associate director of the non-governmental organisation Service d’Appui aux Initiatives Locales de Développement (Support Service for Local Development Initiatives). “It hasn’t worked in the past and it won’t work in the future.”

China cuts rice supplies

The reason is not just that the prices of imports are set internationally. So, too, are freight charges which account for around 60 percent of the cost of imports, the spokesman for the minister of trade said. Other costs outside the control of government include international port handling fees and insurance, said Cameroonian economist Georges Tchokokam.

But what is most important, he said, is that prices are largely set by the relationship between demand and supply, and China, which was the largest rice exporter to Cameroon until 2004, has cut supply. “As long as world demand is higher than supply then removing import taxes will do nothing to resolve the problem,” Tchokokam said.

Since the 5 percent import tax was lifted, rice prices have risen by 7 percent to 320 CFA francs [79 US cents] a kilogram. And the price is likely to rise even higher, Rabelais Yankam, technical adviser to the minister of agriculture, told IRIN. “In a couple of months other [rice exporting] countries besides China could also stop exporting… Then prices will go up even higher,” he said.

Flour and bread

The effects of lifting the 5 percent import tax on flour have been somewhat different. The retail price dropped by an astonishing 13 percent mostly likely because international prices dropped also. However, the price of bread for consumers has remained unchanged.

“A baguette [French-style bread] still costs me 150 CFA francs (37 US cents)…,” Yolande Titi, a woman in Douala, told IRIN. “And though the government said it would make bakers increase the size of the baguettes they produce, in fact the size has got smaller than before the riots.”

Many businesses may be looking to recoup loses from looting during the February riots in which scores of people were killed. But those are the kinds of domestic factors that the government can and must control, the trade minister’s spokesman said.

“In the current situation we are obliged to do something for people even if the World Bank and IMF [International Monetary Fund] do not agree,” he said.

Short-term relief

A spokesman for the World Bank in Yaoundé said that for the moment he could not comment on the government’s current import tax policy. However, a source at the UN Food and Agriculture Organization said unofficially that he thought the measures could offer some short-term relief.

Indeed, the price of imported fish has dropped.

But it is the long-term effects of price controls that worry economists. “Trying to repress prices will create black markets,” said economist Tchokokam.

Alternatively, economist Nana Chimi said that if somehow the government were to succeed in lowering food prices in Cameroon “then traders would export their imported produce to neighbouring countries where prices are higher… then Cameroon would have less food.”

Nana Chimi said the government should re-impose the import taxes and use the revenue to subsidise local production. “Only that what would supply be increased and food security guaranteed,” he said.

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