Monday, September 20, 2021

Ministry Explains Reasons for Price Rise in Essential Food Commodities

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…Covid-19 pandemic is an external factor

By Ndey Sowe

The Ministry of Trade, Industry, Regional Integration and Employment (MOTIE) has issued a statement explaining the causes for the recent increment of prices of some essential food commodities, which are both external and local factors.

Exogenous/External Factors:

The ministry said the external cause for the increase in prices particularly for rice and edible oil is a global phenomenon as result of the COVID 19 Pandemic.

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The trade ministry’s dispatch stated that these products are mainly from South Africa such as China, Malaysia, Pakistan and Thailand some of whom have improved export restriction, thus reducing the supply and the resultant price increase.

“In addition, during this period, there was price increases in global container market index leading to the problem of limited empty containers in these regions. As of the third week of January 2021, the cost of empty containers has increased substantially from an average of USD 2000 per 40ft container in October 2020 to more than USD 9,000 per 40 ft container from Asia to Europe according to Financial Times (see: https://on.ft.com/3isU0xq).  As a result, the shipping lines operating in The Gambia have increased the freight cost to Banjul since November 2020 from USD5000 to USD 11000 per 40ft container,” the dispatch indicated.

The ministry further stated that through its regular monitoring of the stock and price level of essential food commodities, it has observed that the prices of some of the essential commodities have generally increased from the week of 7th December 2020 to the week of 18th January 2021 on average by 4.45% for rice, 0.4% for sugar, 16% for edible oil, 4.2% for potatoes, 3.2% for Onions, 18.2% for chicken leg and 4% for whole chicken.  These prices are for the wholesale market.

“The international commodity prices have been surging from April 2020. This is partly due to the effect of COVID-19 on regional and global supply chains. The price of oil which is a determinant factor on commodity prices continued to rise from the slump in mid-2020. The Price of a barrel of Brent Crude was USD39.8 as at November 19th 2020 and it was USD56.7 as at January 19 2021 representing an increase of 42.46% (Source: Economist Magazine),” the dispatch said.

It said during the period, India which is major exporter of onions and potatoes imposed an export restriction on these products due to the second wave of COVID-19 pandemic.

 “This causes a demand pressure on other major exporters of onions and potatoes such as Holland where The Gambia imports most of her consignments. Hence resulting to a rise in prices of these products in the domestic market,” it stated.

Local/Domestic Factors:

The ministry said in the domestic front, some of the trade support institutions have come up with new tariff/charges effective 1st January 2021. These new measures affect the overall cost structure of the importers of essential food commodities.

“The Gambia Revenue Authority has re-introduced the 20% reduction on the indicative value for all imports including the imports of essential commodities. There was 20% reduction on the indicative value of all imports as a government response to the COVID-19 pandemic in 2020. The re-introduction of 20% on the indicative value will increase the general CIF duty payable to GRA on essential food commodities by 20%,” the dispatch added.

Moreover, it said, some of the shipping agents and shipping line are charging congestion fees USD 300 at the ports to the importers of essential food commodities. This is due to limited container space at the ports leading to congestions. Other cost associated with the shipping agents includes Line Ports Handling Charges USD 50/40ft and Terminal Handling Charges USD105/20ft and USD150/50ft.  

“Given that the Gambia continues to maintain a free market trading regime, The Ministry has strengthened its engagement with the relevant stakeholders in the distributive trade ecosystem to take immediate to medium term measures to contain the price hike. The Ministry convened a consultative meeting with the major importers of essential commodities on Wednesday 20th January 2020. The Ministry also convened a meeting with the relevant stakeholders including Gambia Revenue Authority, Gambia Ports Authority, Gambia Maritime Administration and Shipping Agencies on Friday 22nd January 2020. The objective of these meetings is to understand the recent dynamics in the market with a view of addressing some of the endogenous cost element leading to the recent increase in the price of commodities,” the ministry stated.  

In a bid to address the congestion problem at the port, the ministry’s dispatch said GPA has recently finalized the process of renting a space at the bond road to relocate some of the port’s activities. This will eliminate the port congestion fee charged by the shipping agents.

“The relevant stakeholders’ consultations are on-going and we will review the outcome of these consultations with a view to ensure stability of the prices of the essential commodities. MOTIE will continue to monitor the market and its engagements with the major stakeholder to review the new tariff and fees that is affecting the importation of essential food commodities,” the dispatch stated.   

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