Minimum wage leads to staple food price rises

Minimum wage leads to staple food price rises

LUSAKA, 27 September 2012 (IRIN) – The euphoria that greeted the government’s imposition of minimum wage increases has quickly soured, with prices of food and other essential commodities escalating as higher wage costs are passed onto consumers. Details of the story here 

In July 2012, President Michael Sata’s government upped the minimum monthly salary in line with the 2011 election promise of “more money in the pocket” for poorly paid workers. Wages for domestic workers increased from US$30 to about $105, while general workers such as office orderlies, shop assistants, sweepers and farmworkers saw their monthly earnings more than quadruple from $50 to $220.

In the past month, the cost of 25kg bag of the staple ground maize meal has increased by $1 to $8.50, while other farm produce prices have also risen.

“Everything at the market is now very expensive, and it is like they are being increased every day. Last month, we were buying a bunch of rape vegetables at 2,000 kwacha [$0.40], now it is 3,000 kwacha [$0.60]. And a kilo of beef, which was 21,000 kwacha [$4.20] – now it is 27,000 kwacha [$5.40]. This is too much for us the poor people,” Mwamba Kasonde, a housewife in the capital Lusaka, told IRIN.

“I think the only solution for us is to forget about eating nice, fresh food. We will be buying dry foods; dry fish, dry kapenta [sardines] and soya chunks [processed dry soya]. Chicken and meat should be for special occasions or only for the rich people,” she said.

Stress on the poor
Daniel Mutale, social conditions programme manager for the Jesuit Centre for Theological Reflections (JCTR), a local faith-based think tank, said the sudden cost increase in basic food items was putting additional stress on the poor. About 64 percent of Zambia’s 13 million people live on $1 or less per day, according to Zambia’s Central Statistical Office.

The JCTR publishes the Basic Needs Basket, a monthly survey of food prices and basic commodities required for a family of six in Zambia. “The substantial rise in the cost of basic food items counters the purpose of policies like the recently adjusted minimum wage to foster decent living conditions among the disadvantaged workers,” Mutale said.

“We call on the government to put in place immediate measures to curb the increase in mealie-meal prices [maize-meal] and other essential commodities.”

Hanford Chaaba, spokesperson for the Zambia Consumer Protection and Competition Commission, told IRIN the sharp increases will make Zambian companies vulnerable to external competition, “which will, in the long run, put them out of the market.”

“The instability of food prices acts as a disincentive to having a productive economy. Therefore, any increment in prices on food items results in reduced disposable income for the consumers, and this works to the disadvantage of successful economic growth,” he said.

Apart from food prices skyrocketing, the cost of other essential commodities and services, such as electrical goods and building materials as well as transport fares, are also on the up.

Increase in transport costs
Ishmael Kankhara, a local businessman who owns 200 passenger minibuses, the largest fleet in Lusaka, recently announced he would raise the fare charges for his buses by $0.15 to ensure he pays all drivers a minimum wage of $220. He currently pays his drivers about $100 a month.

“If I pay the [new] minimum wage to all my drivers at the moment, I would run bankrupt within one month, and there would be no more Flash Buses on the roads anymore. So, while a 600 kwacha [$0.15] increment may not be enough, at least it would go some way in cushioning the impact of this law,” Kankhara told IRIN.
Executive director of the Zambia Consumer Association Muyunda Ililonga told IRIN the minimum wage increases have backfired on the poor. “You can’t have more money in the pocket when the cost of living is skyrocketing. This rise in the cost of consumer goods and services is detrimental to consumer welfare.

“The PF [Patriotic Front] government can only successfully show they are different from previous governments if they can lower the cost of living through workable policies. It shouldn’t be coming up with conditions to benefit only a few people, such as the minimum wage revision. They should go for policies to benefit all citizens, such as reducing VAT [value-added tax],” he said.

“If our VAT was reduced to, say, 14 percent [instead of the current 16 percent], it would reduce the cost of food items in the country and, ultimately, the cost of living. Many people, even the unemployed would benefit from reduced VAT,” Ililonga said.

Kennedy Sakeni, the information minister and chief government spokesperson, has condemned employers for passing on the costs of the new minimum wages and vowed that the government would soon “crack the whip”.

“We want to see to it that prices stabilize soon and are reachable by a majority of our population. We want to ensure these prices do not go beyond the reach of average Zambians because the majority of our people are unemployed. They don’t even get any salaries to survive on,” he said.

Share this post