Impact of Rising Food Prices in DRC

UNCLAS SECTION 01 OF 02 KINSHASA 000328 SIPDIS SIPDIS USDA for FAS: DEVANS NAIROBI for FAS: KSMITH E.O. 12958: N/A TAGS: EAGR EAID ECON SOCI CG SUBJECT: Impact of Rising Food Prices in DRC REF: 06 Kinshasa 1182 ¶1. (U) Summary. Food availability in the DRC is already poor, with high levels of malnutrition. Food price statistics indicate a 25 percent increase in food prices over the last six months, in addition to an overall tripling of food prices since the end of ¶2000. Substitution from imported grains and oils to locally produced cassava (manioc) and palm oil seems to be one coping mechanism. Local food purchases by the UN World Food Program may help, but even this program shows the poor availability of food in the DRC. End summary. -------------- Food Availability Already Poor -------------- ¶2. (U) Food availability in the DRC is very poor, with high rates of malnutrition throughout the country due to conflict, displacement, plant disease, severely degraded transportation and infrastructure, lack of credit, high levels of corruption and banditry, chronic underinvestment in research, and other factors. Over the past 15 years, food insecurity has increased significantly: between 1991 and 2002, the number of undernourished people tripled, from 12 to 36 million, and now includes approximately 72 percent of the 60 million population. During this same period, average per capita caloric intake declined from 2170 to 1610 calories per day. Preliminary results from the recent Demographic Health Survey completed in DRC show that 46 percent of children under 5 are malnourished. The United Nation's Food and Agriculture Organization (FAO) categorizes the DRC as a low-income food-deficit country. In urban markets such as Kinshasa and Lubumbashi, rising world prices for staple commodities can only further negatively impact this situation. Congolese media regularly issue anecdotal reports about increasing food prices and the country's inability to feed itself. -------------- Food Price Increases -------------- ¶3. (U) There are a number of measures of food price increases available in the DRC. Both the IMF and the Congolese Central Bank (BCC) have economic units that conduct market basket surveys in order to determine inflation rates. The official DRC inflation rate for 2007, as measured by the IMF and BCC, was just under ten percent. The GDRC National Statistics Institute (INS) and the Embassy Kinshasa Economic Section also conduct market basket surveys. The Economic Section survey has found that over the period October 1 to March 31, 2008, the price of the average Kinshasan's food basket has increased by about 25 percent, with food costs more than tripling between December 2000 and December 2007. (Note: The embassy market basket survey begun in December 2000 was indexed then at 100, and now stands at over 300 for basic food items. Inflation was often very high prior to 2003, sometimes in triple digits. End note.) INS statistics track more closely to Embassy findings than to IMF and BCC statistics, and show food price increases and inflation rates for 2007 and since October 2007 of 36 and 20 percent, respectively, with close agreement on food price increases during those periods. Recent increases in inflation and food prices in Kinshasa are largely attributable to rising fuel and transportation costs, with double digit increases observed in both October 2007 and again in March 2008. -------------- Bread Still Popular, but... -------------- ¶4. (U) Conflict and economic decline has transformed the urban economy from a largely formal sector to about a 90 percent informal sector today. Many people have become dependent upon daily, untaxed sources of income (as opposed to monthly salaries) and are increasingly dependent upon day-to-day income and subsistence purchases, especially in the form of bread. Because bread, especially for breakfast, has now become a relatively larger proportion of the urban diet, as the price for wheat and corn increases, cassava flour could be substituted for wheat flour and corn meal in increasing proportion to produce bread. (Note: during certain periods of the 1980s, this experiment in "cassava bread" was tried and failed. End note.) As with public transportation, where the GDRC-fixed taxi and bus fares were circumvented by shortening routes, the price of bread has been maintained only through an apparent reduction in portion size. -------------- KINSHASA 00000328 002 OF 002 Let Them Eat Cassava... -------------- ¶5. (U) In the DRC, the primary food source has been and largely still is cassava. Though all the cassava consumed in the DRC is produced in-country, the price of cassava has also increased in line with other basic food commodities measured (approximately 25 percent over the last six months). This is likely due to increasing transportation costs and increased demand as the urban population substitutes for the more expensive rice and corn (maize) that are also staples of the average Kinshasan diet. For the same price, approximately USD 50, you can buy twice as much cassava (100 kilos, or 220 pounds) as rice or maize (50 kilos, 110 pounds),making cassava the cheapest calories. (Note: DRC cassava production, like the caloric intake of its people, has also decreased significantly over the last 15 years (as elsewhere in Africa),due primarily to the cassava mosaic virus. Luckily, another staple of the Kinshasan diet is the cassava leaf that often accompanies the cooked cassava-flour dough, since the leaves are relatively high in vitamins, minerals and protein. End note.) In rural areas, where consumption is largely limited to cassava produced by subsistence farms, there should be lesser impacts of price increases. -------------- ...and Cook with Palm Oil -------------- ¶6. (U) As the price for vegetable oil increases worldwide, and, parenthetically, has investors looking seriously at rehabilitating abandoned palm oil plantations in the DRC, there seems to be an increased local demand for artisanally produced palm oil. (Note: The once thriving industrial production and processing of palm oil in the DRC, which reached almost half a million tons in the 1980s, has been reduced to the point where domestic DRC producers of refined oil, soap, and cosmetics are forced to import palm oil from Malaysia and Indonesia (reftel) End note.) Meanwhile, perhaps due to these higher imported vegetable oil prices and resultant substitution, unrefined domestic palm oil prices have increased faster than any other commodity over the last six months but it continues to be a better buy than imported, refined oils. -------------- Local Food Purchases -------------- ¶7. The UN World Food Program (WFP) has a mandate and money for local purchase of food in areas of excess production to feed the hungry in areas of need. WFP/DRC was able to purchase 5,638 metric tons (MT, about 2,200 pounds) of local food commodities in 2007 and has already purchased 2,534 MT in 2008. WFP buys from large scale farmers, traders, and NGOs that organize small scale farmers. The commodities purchased are maize (2/3 of total) and beans (1/3 of total). Regionally (Zambia, Uganda, Kenya, Namibia, South Africa and Tanzania),WFP/DRC has been able to purchase a total of 32,994 MT, primarily maize. This relatively low level of in-country purchases is another indicator of poor food availability in the DRC. ¶8. (U) Comment. The Congolese people in general, and Kinshasans in particular, know how to get along despite hard times. One old joke goes: "What did we do before there were candles?" Answer: "We had electricity." The same might someday be said about cassava bread and wheat bread, or palm oil and U.S. vegetable oil. The most disturbing aspect of this food price trend is that, even with substitution as a coping mechanism, there are those who are having a difficult time putting food on the table. Recent events in Burkina Faso, Cameroon, and elsewhere suggest that there is only so much elasticity in hunger, and that eventually the population may decide that it has not had enough...to eat. End comment. Garvelink