Consumption: the next Budget unlikely to bring down prices

After a period of stability, the prices of basic food products are starting to rise again. What are the reasons for this increase? Will the measures announced in the next Budget reverse the trend? Point.

Consumers once again find themselves having to tighten their belts when shopping in supermarkets. For some time now, several products, notably basic foodstuffs, have seen their prices rise. For example, frozen chicken went from Rs 243 on average in January to Rs 252 currently, an increase of Rs 9. The bag of black lentils went from Rs 30 to Rs 33. Likewise, others products also cost more. This includes rice, pasta, tea, dairy products, and edible oil, among others.

What explains the price increase

Rising freight costs

The spokesperson for the Consumers' Eye Association (CEA), Claude Canabady, is categorical. According to him, there is no doubt that the increase in freight costs mainly contributes to the increase in prices of imported products. “I think that’s the most important factor,” he says. This is also what Alain Saverettiar, general manager of King Savers, says. “The rising cost of freight is a factor that is beyond our control,” he says. The director of Topodom, Dominique To, agrees. “Already, freight has been revised upwards during this peak season. Now, with the lack of boats and delays in arrivals, the cost remains even higher,” explains the importer.

The secretary general of the Consumers' Association of Mauritius (Acim), Jayen Chellum, for his part, is of the opinion that traders use the cost of freight as a pretext to do good business. “During the lockdown, we all know that freight increased. But with the resumption of maritime activities, freight had fallen. However, the prices of imported products have not seen any decline,” he explains. The latter believes that the government must intervene and take action when there are abuses.

Geopolitical conflicts

Claude Canabady recalls that the Russo-Ukrainian war caused a huge disruption in the supply of certain food products, which eventually caused prices to rise. “Similarly, I think that other recent conflicts in the Middle East, notably in Israel, Palestine and Iran, have led to price increases at the global level,” explains our interlocutor. Jayen Chellum agrees. “We buy quite a few products from the Middle East, especially wheat and dried grains. So, we will definitely be affected when there are conflicts in this region,” he said. For his part, Dominique To affirms that the repercussions of international conflicts are inevitable on Mauritius.

Devaluation of the rupee

The director of Topodom indicates that the devaluation of the rupee contributes greatly to the rise in prices. An opinion shared by the CEA spokesperson. “The continued devaluation of the rupee against the dollar is one of the main factors behind the rise in prices,” he maintains. The dollar, he continues, is worth more than Rs 47 currently compared to 2014 when the value was Rs 30. For his part, Jayen Chellum argues that most consumer products are imported. “So, naturally, we will pay more for these products if the value of our currency is low,” he laments.

Lack of control over prices

The secretary general of ACIM affirms that even if there are “mark-ups” applied to certain basic products, prices are not determined by the Ministry of Commerce. “It is the importers who calculate the prices in their favor and send to the ministry for authorization,” he said. As a result, Jayen Chellum believes that there is no real control over prices. “Instead of imposing a mark-up, it would be more appropriate if the government determined and fixed the prices for certain basic products,” he suggests.

Measures to ease the burden on consumers expected

Mauritians' expectations are high for the next budget, which will be presented in a year marked by general elections. Claude Canabady believes that in an electoral context, financial measures can be announced to ease the burden on consumers. However, he believes this may be a temporary solution. “With a weak rupee, in the long term it will still be the same trend. That is to say, prices will rise again,” he says. For him, more impactful measures will be needed to really reverse the trend. Jayen Chellum will not say the opposite. According to him, providing allowances will not solve the problem. “With international conflicts persisting, any compensation given will not be sufficient to compensate for the loss of purchasing power,” he insists. According to him, concrete measures, such as price controls, are necessary. However, Dominique To affirms that a wide range of products is already controlled. “Apart from food products, there are now baby and adult diapers and sanitary napkins, among others,” he says. However, he argues that the problem remains. “This is because the government has no control over external factors, including freight costs,” he says.