The World Bank in Africa |
KAMPALA, April 13, 2011—For the past three years, 37-year-old mother of three Fatuma Ahmed has been making enough money to support her family by selling tea and coffee on the streets of Addis Ababa, Ethiopia’s capital. Not anymore. The sudden increase in food prices, including tea and coffee, is making it very difficult for her to stay in business.
“I cannot afford my own place so I share a room with my two sisters and their four children,” Ahmed says. “The prices of tea, coffee and kerosene fuel have increased substantially over the past few months and so I find it very difficult to continue in business.”
Two months ago, the price of a kilo of coffee in Ethiopia was ETB 57 ($3.45), but now it has gone up to ETB130 ($7.85). Fatuma says she cannot pass on the cost to her customers because they would not be able to afford it.
“Since the increases in the cost of food items, I don’t have as many customers because now people are considering tea and coffee as luxury items,” she says. “I used to earn an average of ETB30 ($1.80) per day but today, I only make about ETB 17 ($1) per day. After deducting my expenses I barely have enough to feed my kids. If things continue like this, I will have to find other ways of making a living.”
Fatuma does not want to talk about those “other ways.”
Over the past six months, the devaluation of the local currency against the dollar by almost 17 percent, coupled with a 40 percent increase in fuel prices, has led to a serious hike in food prices making it harder for millions of Ethiopians like Fatuma to make ends meet. During the month of February, the cost of living across Ethiopia escalated further with inflation rate reaching 16.5 percent; more than double the September 2010 level.
Neighboring Sudan is not doing any better. Ali Adam, 47, a grocery store owner in Khartoum says his grocery is no longer making profits and he has fewer customers queuing up for goods. He blames it on rising transport costs, a result of increased fuel prices, which are seriously eating into his profits.
“The price of many goods has almost doubled in recent weeks,” Adam says. “A 20-litre jerry can of cooking oil is no longer affordable to most consumers because its price has almost doubled from SDG70 ($25) two months ago to SDG120 ($42) today.”
The situation is similar for Kagabo, 40, a trader in Burundi who mainly deals in cassava flour. He says his sales have declined by half and blames the fuel prices for his troubles.
“I used to sell more than 120 kilos of cassava flour but now I sell less than 60 kilos per day,” he says. “I had to increase my sale price because of the increased transport costs and now very few people are buying.”
John, a taxi driver in Burundi concurs: “We used get more than 20 customers before noon, because all officers and business men were traveling by taxi within the city of Bujumbura, but now very few of them can afford a taxi….We used to get more than US$25 per day but now it is a miracle if we get even $8.”
Burundi’s fuel prices have tripled over the last six months.
The cost of staples in Uganda, high taxes in Tanzania
The situation is the same across Eastern Africa. A prolonged drought combined with a sharp spike in fuel prices has not only affected businesses but the livelihood of millions of families. Most countries have been hit by inflation and their currencies have depreciated greatly against the US dollar.
In Uganda, for example, inflation has shot up almost two-fold over the last month to 11.1 percent, up from 6.4 percent in February 2011. Fuel prices have increased by over 50 percent from Ugs.2,300 ($1) per liter of petrol to Ugs.4,000 ($1.70) in over two months.
These combined hits have produced desperate measures. Specioza Ndagire, a fruit vendor in Kampala’s Nakasero market is planning to return to the village because she can no longer afford to live in the city. She has been selling local and imported fresh fruits for the past 10 years. Her stall has boxes of imported apples and oranges from South Africa, and local paw-paws, bananas, water melons, and pineapples.
“Food has become extremely expensive and no one is interested in buying it,” she says. “I got my fruits on Monday, but up to now (Wednesday) I have not even sold half of them and yet before, they would only last a day then I ‘d re-stock.”
Ndagire says a box of South African apples has almost doubled in price from Ugs.80,000 ($35) to Ugs.130,000 ($56). This has meant that she has had to increase the price per apple. As a non-essential food item, most people have opted to stop buying, she says
Ndagire is now contemplating closing her business because of the rise in overheads. Her rental costs for a stall in the market have risen from Ugs.100,000 ($43) to Ugs.150,000 ($64) in the last two months. She blames it all on the increased cost of living which has been driven by inflation, increases in food prices caused by both drought and high transport costs, and the increase in fuel prices.
Sarah Birungi, 48, the caretaker of Eno Restaurant in Kampala says she also is feeling the full scale impact of the crisis. A bunch of Matooke (green bananas), the staple food for most Ugandans in the central region, has doubled and in other cases even tripled ranging from Ugs.25,000 ($11) to Ugs.50,000 ($22) up from Ugs.12,000 ($6) in December last year. Tilapia fish, a favorite of many people at her restaurant, has doubled to Ugs.20,000 ($9) per average sized fish from Ugs.10,000 ($5) a month ago. However, despite the increase in prices, she has not yet increased the price of a plate of food because she fears she will lose customers and ultimately her business.
Birungi’s dilemma is similar to that of Madamu, a widow, mother of five and trader in Burundi who says her government is taking up the little money she has remaining in taxes.
“I can no longer make ends meet because I used to earn enough money for my children’s education and pay my water electricity bills. Now it seems that all I earn is for the government taxes.”
To demonstrate the impact on families, many are now unable to pay their bills. In most countries the impact of the increased food and fuel prices is hurting the poorest of the poor. More households are spending a higher proportion of their limited incomes on food while at the same time they have lowered consumption to essentials. In countries like Sudan, it is a common phenomenon to see women selling tea in the doorways of local shops, behind buildings and under trees.
Food and fuel a double hit
Halima Abbas, 42, is one of those women who sells tea to earn an income for her family. She said this seemed like her only option after her husband fell ill.
“My husband is sick and has occasional work as a casual laborer on construction sites,” she said. “The recent increase in food price has forced us to feed our four children only one meal a day. We eat only what we can afford to buy and I can’t remember the last time we ate meat or fruits.”
Further south in Juba, Dick Mugwere, 34, who runs a small restaurant, says vegetable prices have doubled and prices for other food items such as beef and rice increased by more than 30 percent following the devaluation of the pound against the dollar and the rise in fuel prices. A liter of diesel goes for 3.50 Sudanese pounds ($2) up from 2.50 in December last year. The restaurant relies on imported food. To make a small profit, Mugwere raised the price of a meal in his restaurant by 30 percent, which lost him a large number of customers.
“These days,” he says, “I spend about 250 Sudanese pounds ($68) to prepare lunch but I hardly get my money back.”
Francis Gikara, 58, a taxi driver in Nairobi, Kenya, has the same story. He says that fuel has increased by a whopping Kshs.20 ($.25 cents) and is now Kshs.102.40 ($1.20) from Kshs.80 (about $1) a few months ago.
“I’m not making money anymore,” he says. “I can’t charge my clients more and traffic jams are making it worse because my vehicle is consuming more fuel. I am also not getting enough clients because they don’t have money. Everyone is crying because fuel and food prices are high.”
Gikara says he believes, apart from the spike in international oil prices caused by instability in Middle East, his government is taking a lot of taxes from fuel. He believes that things would be better if the government reduced the taxes on fuel.
In Tanzania, the food situation has been mainly impacted by a poor harvest caused by drought and dwindling trader food stocks, an increased number of households dependent upon the market, and increased fuel prices. This has caused a rise in the staple foods. During the month of January, the government distributed 8,014 tons of grain at subsidized prices or for free in some instances to Arusha, Monduli, Longido, and Iringa districts, according to the Central Bank.
The situation in Tanzania is exacerbated by critical power rationing due to a lack of capacity for power generation and decreasing water levels. This is affecting casual employment and food processing in urban and suburban areas, limiting incomes for low-income urban and suburban households.
The combination of high fuel costs due to international pressures and high food prices due to drought and transport costs have weakened local currencies in Eastern Africa and have hurt producers and consumers. Transporters have increased prices, which has resulted in a considerable increase in prices of consumer goods. Inflation pressure, primarily driven by the fuel and food prices, has nearly doubled in all countries.
Oil prices reached US$115 a barrel in mid-March 2011, an increase of over 40 percent from an average of US$80 a barrel in 2010. The impact of this on Eastern African countries has been a widening of the current account deficit which is likely to impact overall GDP unless there is a dramatic improvement in the situation