Supply of Wheat and Sunflower
Russia and Ukraine are major exporters of cereal crops. Cereal crops include wheat and sunflower. Russia and Ukraine supply about 30% of world wheat exports and 65% of world sunflower exports, leading to them being referred to as one of the world’s breadbaskets. Wheat is used to make bread flour and pasta while sunflower is used to make sunflower cooking oil.
As you may know, Botswana does not produce wheat or sunflower so we import these goods from South Africa, which itself imports from Russia and Ukraine. With the war ongoing, production is disrupted in Russia and Ukraine, therefore global supply of the two is reduced. With supply limited, countries have to import from elsewhere. This means the supply of wheat and sunflower is currently reduced thus driving up prices. The result is that the cost for shops in Botswana to bring in sunflower oil and wheat products goes up, and they in turn raise prises that they sell to the public. This is why the prices of cooking oil, bread flour and bread products have gone up – and keep going up – at the retail stores.
Supply of Fertilisers
Russia is one of the biggest exporters of farming fertilisers in the world. Fertilisers are used to grow crops that we then turn to the food we eat. Limited fertiliser supply means fertiliser prices go up and this increases farming costs for farmers. These farmers the increase the price of the produce they sell to wholesalers. Wholesalers increase prices for the retailers who ultimately pass the price increase to the ordinary Motswana on the street, hence the drastic price increases we have been seeing at the shops.
Supply of oil
Russia is the 3rd largest producer of oil in the world. Since the war began, sanctions have been imposed on Russia by the international community and these sanctions include countries not buying oil from Russia. This has had a massive impact on the oil supply globally. With the supply of oil limited, oil prices have been going up. The petrol that we put in our vehicles is refined from oil. When oil prices go up, then the price of petrol at the pump will increase to reflect the increased cost of petrol stations providing that petrol to the public.
The higher fuel price has far reaching consequences in our lives. The products that we consume in Botswana are mainly imported from South Africa and thus have to be transported to reach us. Suppliers of goods incur higher transport costs because of the constantly increasing fuel price which then prompts them to increase the prices of the goods they sell to us. As a result, we may start paying higher for everything that we generally purchase as oil price increases have a much wider impact than the other goods mentioned above.
What does this all mean for you?
The increase in prices from the above factors is what is referred to as inflation. Though Bank of Botswana has a mandate to maintain the inflation rate between 3% – 6%, Covid-19 and now the war has seen inflation push through the 6% maximum target to almost 10%. All this, explains why we have been experiencing unusual and multiple increases in prices both at the shops and filling stations. With the war between Russia and Ukraine still ongoing, there is no telling when prices will stabilise.
