Monday, November 4, 2024

Import ban on veges pushes Botswana’s inflation higher

Botswana’s inflation rate has seen a significant increase, with official figures pointing to the ongoing vegetable import ban as a major contributor. According to the latest data released by Statistics Botswana, the Food & Non-Alcoholic Beverages index rose by 0.6 percent between July and August 2024, driven primarily by a 4.9 percent surge in vegetable prices.

The vegetable import ban, which was extended last year to encourage local farming, has inadvertently led to supply shortages across the country. This scarcity, in turn, has driven up the cost of fresh produce, putting further pressure on households already grappling with high food prices.

Aside from the sharp rise in vegetable prices, other key contributors to the inflation in the Food & Non-Alcoholic Beverages category include Coffee, Tea & Cocoa, which saw a 3.3 percent increase, and Milk, Cheese & Milk Products, up by 1.2 percent, according to Statistics Botswana.

The government’s efforts to promote local agriculture have spurred growth in some sectors, but critics argue that the ban has caused unintended consequences by limiting supply before local production could fully meet demand. 

In August 2024, Botswana’s annual inflation rate reached 3.9 percent, up from 3.7 percent in July. The report highlights that the transport sector remained the largest contributor to the inflation rate, accounting for 1.5 percentage points of the annual figure. Miscellaneous Goods & Services, alongside Food & Non-Alcoholic Beverages, each contributed 0.7 percentage points to the total inflation rate.

The rise in inflation varied by region. Rural Villages saw the most significant increase, with inflation climbing from 4.2 percent in July to 4.6 percent in August. Cities and Towns, as well as Urban Villages, registered more modest increases, rising by just 0.1 percentage points each.

The National Consumer Price Index (CPI), a key indicator of inflation, rose by 0.2 percent between July and August, reflecting higher prices for goods and services nationwide. The CPI for Rural Villages increased by 0.6 percent, while the indices for both Cities & Towns and Urban Villages saw smaller gains of 0.2 percent and 0.1 percent, respectively.

Speaking on the report, Acting Statistician General Dr. Lucky Mokgatlhe commented: “This report examines Botswana’s monthly inflation rate performance as measured by the Consumer Price Index (CPI). It provides valuable insights into the changes in the cost of living and reflects the dynamics of price fluctuations in the economy.”

As inflation continues to climb, concerns are rising over the long-term impact of the vegetable import ban, with some urging the government to find ways to balance local agricultural support with food affordability for consumers. The ban on the importation of fresh produce, which included a host of vegetables like tomatoes, potatoes, onions and other produce, was set to expire in December 2023, but was extended to the end of 2025, with the government expanding the list to include cucumber, asparagus and lettuce among others. Businesses in the restaurant and education sectors have since proposed a phased approach to restrictions on the importation of vegetables and school uniforms, saying an abrupt ban stifles their operations. On behalf of these sectors, Business Botswana – an advocacy organisation for the private sector – recommended the government to consider a phased restriction strategy to enable the affected sectors to adjust.

According to Business Botswana, in the first year, at least a fifth of the required imports should be restricted. Business Botswana proposes further that in the second year government will double the figure to 40 percent, 60 percent in the third year, 80 percent in the fourth year and 100 percent in the fifth year.

“This will allow capacity development by local producers and cushion against inflationary spikes and smuggling resulting from excess demand,” Business Botswana said, on behalf of the sectors. 

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