Consumption: Living expenses: Shopping cart – Oops!

A recent Afrobarometer survey leaves no doubt: the main concern of Mauritians remains the cost of living, with purchasing power disappearing almost as fast as our beaches. It shows that many Mauritians believe that the government has failed to stabilize prices, reduce inequality, improve conditions for the poor, manage the economy satisfactorily or create jobs. Pessimism reigns supreme over the next 12 months. Men and urban dwellers are particularly worried: 44% of urban dwellers and 36% of villagers believe the economic situation will be worse in 2024, while 41% of men and 37% of women also hold this view.

In fact, the increase in import costs directly affects the price of goods in Mauritius, putting additional pressure on the purchasing power of Mauritians, as most products are imported. Despite government measures and subsidies, consumers are keenly feeling the effects of inflation. Freight prices have remained unchanged for two weeks in a row after rising since May as geopolitical tensions and logistical disruptions have increased the cost of ocean freight. Red Sea shipping, a key route connecting the Suez Canal and accounting for 10-15% of global trade, has been severely disrupted by the Houthi attacks. (Editor’s note: named after its leader Hussein Badreddin al-Houthi and his brothers, it is a Zaidi armed, political and theological organization, initially active in Saada province and northwest Yemen, and then in all countries since 2014).

If we compare the data from November 2023 to June 2024, we see a significant increase in freight prices. A 20-foot container will cost a maximum of $1,350 and a 40-foot container will cost a maximum of $1,550. Currently, a 20-foot container costs $5,800 and a 40-foot container costs $9,200. “We need to monitor the situation very closely because the demand for containers is increasing. This complicates the situation further. When it increases, it becomes difficult to get containers and the prices go up even more.” explains Yousouf Delbar, spokesman for the Association of Freight Forwarding Professionals.

Trade Minister Dorine Chukowry told parliament on July 30 that the global freight index had increased by 80 percent, according to the Baltic Freight Index. “Geopolitical instability in the Red Sea has forced ships to reroute to longer, safer alternative routes. This not only increases transit time, but also increases fuel consumption and operating costs. Furthermore, she added, “US sanctions on Chinese imports have disrupted trade flows and global supply chains, leading to higher freight rates. Companies are looking for alternative sources and alternative routes, which is increasing delays and fuel costs. The new main Asia-Europe route passes through Durban, but the route faces congestion and reduced availability, leading to delays and higher costs. Delays at Chinese and Singaporean ports, container shortages and a shift towards long-haul freight services have led to higher surcharges and tariffs, affecting regional and low-volume trade routes, making it more expensive and difficult for Mauritian importers to access freight services.”The situation complicates the operators’ tasks. She insisted that her department will continue to work with the three major shipping lines – CMA CGM Mauritius Ltd, Mediterranean Shipping Company (Mauritius) Ltd and Maersk Mauritius Ltd – and other relevant sectors to find short-, medium- and long-term solutions.

The minister pointed out that subsidies on basic products make it possible to keep their prices at fixed levels. She stressed that the government provided financial assistance of Rs 4.6 billion in the form of price subsidies on LPG, flour, rice and bread. To this, 37 regulated basic products and markups were added (Editor’s note, the markup rate indicates the share of commercial profit in the selling price of a commodity. It estimates the profitability of product sales or sets the selling price of pharmaceutical products (excluding taxes on the purchased goods). She also insisted that the money collected from fuel will be returned to the people in the form of subsidies.

On the other hand, the Minister confirmed at a press conference on Saturday, July 27, that despite the high cost of living, Mauritians live well. She said: “I invite you to descend to shopping mall All over the country, look at how many people are eating out. All the restaurants are full. That’s a sign that people are living well. Every shopping centeryou have to line up to get into the restaurant. You have to wait for people to leave before you can get a seat and get served. It’s almost like a game of musical chairs to get a seat in a restaurant.” As we have seen on social networks, these comments have not been well received by citizens, who would rather assert “Survival”.

Nicolas Martin, a father and self-employed business owner, explained that with the current high cost of living, it is difficult to get enough to live on. “It’s not obvious. I have four daughters to look after. The youngest is only three years old. My 22-year-old daughter doesn’t have a job and she’s become a mother. I have to deal with it. I just bought a house. There are loans to pay off and quotes to give to clients without the shipping costs of returning. He pointed out “Dishonest businesspeople, including false promotions, and mismanagement by the Ministry of Commerce”He lamented the profits carriers could make when freight volumes increased. “Strict control is needed. It is normal for companies to make profits, but they cannot abuse prices to harm the interests of consumers.” It also highlights shortcomings in consumer protection laws.

Despite the increase in pensions, it is still difficult for residents. Retiree Farhad also admitted that the high cost of living weighs on his mind. “Pensions did increase. That was a relief, but at the same time prices continue to rise. There should be more prices set to avoid abuses such as overpricing. At the end of every month, you have to pay more for groceries.”

Jayan Chelem, secretary general of the Mauritius Consumers Association, pointed out that the lower-class consumers as well as the middle class are suffering greatly from this situation. He explained“Prices for unsecured and unmarked cargoes have risen as more expensive cargo ships arrive in the country”. Plus: “ACIM has neither the human nor the financial resources to analyse thousands of imported products. However, it is a common observation that rising raw material prices, freight taxes and companies’ import profits lead to inflation.” He recalled that the increase “exaggerated” Despite falling world market prices, fuel prices have not fallen, and the monopoly of certain companies over imports has created an imbalance. “Except for certain food items, the government does not interfere because it maximizes tax revenue. Operators take full advantage of it. Consumers are punished. There is no equivalence between the allocations in the last budget and the loss of purchasing power. The governor shot Razan, but he met Dewat.”

Gyro Rupee

The depreciation of the Mauritian rupee against the US dollar has a direct and significant impact on the economy, especially in terms of food costs and imports. Since Mauritius imports most of its food, a weaker currency means higher prices for these goods.

When the rupee depreciates against the dollar, importers have to pay more rupees to buy the same amount of goods in dollars. This means that the cost of imported food items such as rice, wheat, cooking oil and other essentials is increasing. These cost increases are often passed on to consumers in the form of higher prices in supermarkets and local markets. This situation puts additional pressure on the purchasing power of Mauritians, especially for low-income families who spend a large part of their budget on food. Moreover, rising food prices can lead to general inflation, which can affect the entire economy.

In addition to food, Mauritius imports a wide range of products, including raw materials, manufactured goods and capital goods. The depreciation of the rupee makes these imports more expensive, which may put pressure on local businesses that rely on these products for their business. It may also reduce the competitiveness of Mauritian businesses, which must absorb these additional costs or pass them on to customers, which may limit demand.

The combination of higher import costs and higher food prices could exacerbate economic inequality and increase social stress. The most vulnerable households could face greater instability, while local businesses could see reduced profits, which could weigh on growth and employment. Subsidies and other social measures have their limits and cannot fully offset the effects of prolonged currency depreciation.

In short, the falling rupee against the dollar exacerbates the economic challenges facing Mauritius, making the management of food and import costs critical to the well-being of the people and the country’s economic stability.

What is freight?

Freight is the movement of goods by any means, primarily by sea, air or land. It can include raw materials, finished or semi-finished products and other types of goods that are moved from one location to another, often across international borders.

In ocean shipping, freight rates refer to the costs associated with shipping a container, which can vary based on distance, cargo type, weight, and overall market conditions. These costs are affected by a variety of factors, such as container demand, fuel prices, geopolitical tensions, and supply chain disruptions.

In Mauritius, where most consumer goods are imported, fluctuations in freight prices directly affect the cost of goods, which in turn affects consumers’ purchasing power. Local businesses that rely on imports must adjust their prices according to changes in freight rates, which may lead to higher product prices in the Mauritian market.