IRIN
CAMEROON: Lifting of import taxes fails to reduce food prices
29 April 2008


DOUALA, 29 April 2008 (IRIN) - Almost two months after the government
lifted import taxes on rice, flour and fish in response to riots caused
in part by high food prices, consumers are still paying the same, and in
some cases more.

"We are fighting to ensure prices remain low while operating within the
constraints of a free market," the spokesman for the minister of trade,
Alphonse Ateba Ndoumou, told IRIN.

The 5 percent import tax was lifted on 7 March after the government made
a deal with wholesalers. "They agreed to lower prices if we lifted
taxes," Ateba Ndoumou said.

"The problem now is the retailers," he said. "They have not respected
the deal."

The government closed down 50 retail shops in the commercial capital
Douala and the capital Yaounde which were selling rice at the old price.
But retailers with whom IRIN spoke said they were still waiting for the
wholesalers to drop their prices.

"The government can't make us sell at a lower price until we can buy at
a lower price," a rice retailer in Douala's central market, Jean Marc
Mbarga, told IRIN.

Whoever is at fault, prices controls are not going to work, economists
in Cameroon told IRIN. "Prices cannot be set by decree," said economist
Hozier Nana Chimi, associate director of the non-governmental
organisation Service d'Appui aux Initiatives Locales de Developpement
(Support Service for Local Development Initiatives). "It hasn't worked
in the past and it won't work in the future."

China cuts rice supplies

The reason is not just that the prices of imports are set
internationally. So, too, are freight charges which account for around
60 percent of the cost of imports, the spokesman for the minister of
trade said. Other costs outside the control of government include
international port handling fees and insurance, said Cameroonian
economist Georges Tchokokam.

But what is most important, he said, is that prices are largely set by
the relationship between demand and supply, and China, which was the
largest rice exporter to Cameroon until 2004, has cut supply. "As long
as world demand is higher than supply then removing import taxes will do
nothing to resolve the problem," Tchokokam said.

Since the 5 percent import tax was lifted, rice prices have risen by 7
percent to 320 CFA francs [79 US cents] a kilogram. And the price is
likely to rise even higher, Rabelais Yankam, technical adviser to the
minister of agriculture, told IRIN. "In a couple of months other [rice
exporting] countries besides China could also stop exporting. Then
prices will go up even higher," he said.

Flour and bread

The effects of lifting the 5 percent import tax on flour have been
somewhat different. The retail price dropped by an astonishing 13
percent mostly likely because international prices dropped also.
However, the price of bread for consumers has remained unchanged.

"A baguette [French-style bread] still costs me 150 CFA francs (37 US
cents).," Yolande Titi, a woman in Douala, told IRIN. "And though the
government said it would make bakers increase the size of the baguettes
they produce, in fact the size has got smaller than before the riots."

Many businesses may be looking to recoup loses from looting during the
February riots in which scores of people were killed. But those are the
kinds of domestic factors that the government can and must control, the
trade minister's spokesman said.

"In the current situation we are obliged to do something for people even
if the World Bank and IMF [International Monetary Fund] do not agree,"
he said.

Short-term relief

A spokesman for the World Bank in Yaounde said that for the moment he
could not comment on the government's current import tax policy.
However, a source at the UN Food and Agriculture Organization said
unofficially that he thought the measures could offer some short-term
relief.

Indeed, the price of imported fish has dropped.

But it is the long-term effects of price controls that worry economists.
"Trying to repress prices will create black markets," said economist
Tchokokam.

Alternatively, economist Nana Chimi said that if somehow the government
were to succeed in lowering food prices in Cameroon "then traders would
export their imported produce to neighbouring countries where prices are
higher. then Cameroon would have less food."

Nana Chimi said the government should re-impose the import taxes and use
the revenue to subsidise local production. "Only that what would supply
be increased and food security guaranteed," he said.

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