The Linkage between Governments’ COVID-19 Response Measures, Real Exchange Rate, and Grain Prices in South Africa

Moses Herbert Lubinga, Fezeka Matebeni, Corné Dempers, Ndiadivha Tempia

Abstract

Coronavirus disease (COVID-19) outbreak disrupted global supply chains as countries imposed various response measures to contain the spread. This paper examines the nexus between governments' COVID-19 response measures, real exchange rate, and prices of wheat and maize in South Africa. We used daily data, spanning from February 07 until September 25, 2020, for the stringency index, import parity, and South African Futures Exchange (SAFEX) prices of maize and wheat. We considered South Africa's major suppliers of wheat and maize, i.e., Argentina, Germany, and the United States (US). Maize was disaggregated into two categories, namely: white and yellow maize. Both descriptive and Pearson correlation analyses were used to establish the nexus. Findings suggest that COVID-19 response measures are associated with the observed depreciation of South Africa's Rand against the US Dollar and the spikes in SAFEX prices of wheat and maize. Furthermore, results reveal a moderate to a strong positive relationship between South Africa's real exchange rate and the prices of wheat and maize. However, consumers' increases in wheat and maize prices were borne, as exhibited in higher retail prices observed in South Africa between February and September 2020. Results also reveal a strong nexus between the levels of strictness imposed by the different countries. Therefore, imposing very strict measures in one country tends to lead to similar strict measures in other countries. The significance of the results in minimizing the COVID-19 outbreak is twofold. First, countries may consider revisiting the restrictive response measures put in place, given that the measures affect supply chains in other countries. Second, South Africa needs to diversify the sources from which it imports maize and wheat.

 

Keywords: food price inflation, import parity price, National Agricultural Marketing Council, SAFEX Price, South African Grain Information Service.


Full Text:

PDF


References


REARDON, T., BELLEMARE, M.F., and ZILBERMAN, D. How COVID-19 may disrupt food supply chains in developing countries. https://www.ifpri.org/blog/how-covid-19-may-disrupt-food-supply-chains-developing-countries, 2020-05-16.

RAHMANITA, M., NURBAETI, F.A., and TRIANA ROSALINA DEWI, T.R. COVID-19 Pandemic: Happiness Revisited through Work and Leisure during the Stay at Home Period. Journal of Hunan University: Natural Sciences, 2021, 48(4):100-107.

YUSUF, A., ADITYA, R.S., and SOLIKHAH, F.K. Pandemic COVID-19: Experience of Study from Home for Undergraduate Nursing Students in Rural Areas. Journal of Hunan University: Natural Sciences, 2021, 48(4):127-138.

International Monetary Fund (IMF). A year like no other. Washington, DC: IMF, 2020.

ENCA. JSE tumbles as coronavirus restrictions intensify. https://www.enca.com/business/jse-tumbles-coronavirus-restrictions-intensify, 2020-10-19.

BIZ COMMUNITY. Role players meet to discuss the alcohol ban's impact on the wine industry. https://www.bizcommunity.com/Article/196/786/206827.html, 2020-10-05.

MASHEGO, P. Alcohol ban's shattering impact on the glass. https://www.news24.com/fin24/companies/alcohol-bans-shattering-impact-on-glass-industry-20200726, 2020-07-06.

United States Department of Agriculture (USDA). South Africa Could See a 20 Percent Drop in Wheat Imports in the Next Marketing Year on Increased Production. Pretoria: USDA, 2020.

National Agricultural Marketing Council (NAMC). South African supply and demand estimate. Pretoria: NAMC, 2020.

Human Sciences Research Council (HSRC). Assessment of the impact of COVID-19 on agriculture and the food system in South Africa. Literature review report. Pretoria: HSRC, 2020.

Business Insider. The SA coronavirus shopping list: here is what sold out when COVID-19 hit elsewhere. https://www.businessinsider.co.za/coronavirus-shopping-list-for-south-africa-2020-3, 2020-03-05.

Deloitte. How COVID-19 has affected South African Grocery Retail Consumer Sentiment. Pretoria. Deloitte. https://www2.deloitte.com/content/dam/Deloitte/za/Documents/za_Deloitte_BrandsEye_Consumer-Sentiment-report_May%202020.pdf, 2020-05-20.

Statistics South Africa (StatsSA). Manufacturing: Production and sales. Statistical Release P3041.2. Pretoria: StatsSA, 2020.

Business Insider. These SA businesses have not survived lockdown - including popular restaurants and stores. https://www.businessinsider.co.za/sa-business-that-may-not-have-survived-lockdown-2020-6, 2020-10-5.

Business Insider. South Africa’s hospitality industry beyond COVID-19. https://partners.24.com/TheBiggerPicture/HospitalityBeyondCovid19/index.html, 2020-05-05.

National Agricultural Marketing Council (NAMC). Food price monitor. Pretoria: NAMC, 2020.

Statistics South Africa (StatsSA). Retail Trade Sales. Statistical Release P6242.1. Pretoria: StatsSA, 2020.

International Trade Centre (ITC). COVID-19 Temporary Trade Measures. Temporary trade measures enacted by government authorities about the COVID-19 pandemic are rapidly spreading across the world. https://www.macmap.org/covid19, 2020-06-10.

Bureau for Food and Agricultural Policy (BFAP). Bi-Weekly Trade Tracker June 2020 #1. Pretoria: BFAP, 2020.

GRAIN, S.A. Prys inlighting (plaaslik en internasionaal) / Price information (domestic and international). https://www.grainsa.co.za/pages/industry-reports/market-reports, 2020-10-10.

Our World in Data. COVID-19: Government response stringency index, September 28, 2020. https://ourworldindata.org/grapher/covid-stringency-index?time=2020-01-22..latest, 2020-01-22.

South African Reserve Bank, (SARB). Selected historical rates. https://www.resbank.co.za/en/home/what-we-do/statistics/key-statistics/selected-historical-rates, 2021-01-05.

YANG, X.D., LI, H.L., and CAO, Y.E. Influence of Meteorological Factors on the COVID-19 Transmission with Season and Geographic Location. International Journal of Environmental Research and Public Health, 2021, 18(2): 484. https://doi.org/10.3390/ijerph18020484

GLEN, S. T-Score vs. Z-Score: What is the Difference? From: Elementary Statistics for the rest of us! https://www.statisticshowto.com/probability-and-statistics/hypothesis-testing/t-score-vs-z-score/, 2021-07-11.

Reuters. South Africa’s 2020 maize crop expected to increase by 37% - Reuters survey. https://www.agriculture.com/markets/newswire/safricas-2020-maize-crop-expected-to-increase-by-37-reuters-survey, 2020-11-16.

WANDILE, S. South Africa might be on track for another good crop harvest in the 2020/21 production season. https://wandilesihlobo.com/2020/08/01/south-africa-might-be-on-track-for-another-good-crop-harvest-in-the-2020-21-production-season/, 2020-08-01.

National Agricultural Marketing Council (NAMC). South African Supply and Demand Estimates. Pretoria: NAMC, 2020.

BUSINESS TECH. South Africans are panic buying because of coronavirus – but that could lead to further problems. https://businesstech.co.za/news/business/382235/south-africans-are-panic-buying-because-of-the-coronavirus-but-that-could-lead-to-further-problems/, 2020-09-12.

VILJOEN, W. Coronavirus, food supply, and demand constraints: panic-buying and logistics. https://www.tralac.org/blog/article/14473-coronavirus-food-supply-and-demand-constraints-panic-buying-and-logistics.html, 2020-03-31.


Refbacks

  • There are currently no refbacks.