Sunday, September 12, 2010

Mozambique is a Mystery

About 6 days ago Maputo erupted into a riot. 13 people were killed, 600 people were injured and 148 were arrested. Over the next few days as 280 more people were arrested on suspicion of instigating the riots, the Mozambique government lowered the price of bread, and the riots ceased.

"Why did this happen?" is a good question, but it is always answered poorly. "Why only in Mozambique?" is a better one, but it is never even considered.

Yes, global wheat prices spiked. Is this cause to lambast the global market place? It is easy to stand up and point the finger are the global market. Those damn speculators and free marketeers, they're ruining the world, right? Possibly. But even after reading Mr. Patel's well-intentioned piece (the link above) we still have our question: "Why only Mozambique?".


Here's one answer: Wheat prices spiked by 5%, bread in Maputo rose by 30%. Is this mentioned in a single international news article? Not that I can see.

We must look at the details of the Mozambique bread market to understand why. But, no one is doing this. Of the 10 or so articles I have read about this riots, not one went into any detail about the inefficiencies of the Mozambique marketplace. No one mentioned domestic producer collusion, or tarriffs or quotas or taxes, or even transportation inefficiencies. Most pieces were stuck on Russian fires. These, in my opinion, are barely worth a mention. They skirt around the issue here. The problem is not that wheat prices can jump around, its the multiplier effect of domestic inefficiencies (from up 5% to up 30%).

During the food crisis of late 2007/2008 riots were widespread the security of the global food production system was legitimately called into question. This situation is different, as is each instance of localized rioting (be in in India or the DR), but it is not treated as so by the international media.

This is detrimental our understanding of global resource systems.

One article does mention that the Mozambique Metical fell 33% against the South African Rand this year. How could this have an effect on the price of bread in Maputo?

(read the comments for an answer)


  1. The devaluation of the Metical against the rand affects prices on almost everything because most consumer goods are imported from South Africa. So the increase in global wheat prices hits wheat flour in South Africa and is passed on to Mozambique, but exacerbated because Mozambicans have to pay 30% more Meticais for the same products, which are now more expensive because the cost of inputs has risen.

    I agree with you, though, there should be much more coverage about inefficiencies in local markets, transport costs, etc. There are many inputs to the cost of a single product. Note, however, that the increase in wheat (and therefore bread) prices came along with increases in petrol (which translated immediately to huge increases in the price of public transport, on which the urban poor rely to get to work), water and electricity. These have been subsidized since well before last year's elections, and now the government are removing the subsidies.

  2. The frequent claim that bread prices rose by 30 per cent is simply untrue.

    In my Maputo bakery, the price of a bread roll rose from 1.5 to two meticais - which is 33 per cent, and the price of a 250 gram loaf rose from five to six meticais, or 20 per cent.

    The decision of the Bakers' Association, reached at a meeting on 2 August, was simply to add one metical or half a metical (50 centavos) to the price, as from 1 September.

    That was simply because all coins smaller than 50 centavos have long since disappeared from circulation.

    The bakers' justification for the price rise was that the milling companies had increased the price of a 50 kilo sack of wheat flour from 850 to 1,050 meticais.

    The bakers' claim that Mozambican bread, even after the price increase was still cheaper than in several other southern African countries - the equivalent of about 18 US cents for a 250 gram loaf.

    Trix is wrong about public transport fares. These have been frozen, both for the public bus company, TPM, and the private minibuses, for more than two years.

    Water and electricity prices had been frozen for three years. This was becoming unsustainable - the water and electricity companies need higher tariffs to help fund their investment programme.

  3. Trix - I agree entirely, thanks for the comment!

    Paul - Thanks for the details; are you living in Mozambique?

    I think Trix was merely saying that an increase in the price fuel and electricity will make it more expensive to transport (and possibly store) wheat. This would make it more expensive to make bread.

    You highlight exactly what I was getting at. It is not the market, left to its own accord, that created this debacle. The bakers assoc. and the government have been meddling with prices for some time now.

    Both parties misjudged a pricing adjustment. That is the crux of the matter. But perhaps the denominations of available coins have some influence here too. Fascinating!

    Details like this never seem to make headline news. Is it because fires in Russia just sound sexier?