41 / 73
ႆႃ
CHAPTER 1
During the first two years of its existence the Wheat Board was faced by surplus
production and the consequent domestic surpluses, which forced the price of wheat
even further downwards. However, by employing income from the levy on wheat
milled in the interior and with the assistance of the government, the Wheat Board
managed to prevent a total collapse in the wheat price.
Under the control of the Wheat Board the wheat industry was subject to strict
control measures. Wheat was marketed in a single-channel system and producers
received a set price for their wheat, while millers also paid a set levy and were
subject to strict oversight by the Wheat Board with respect to the quality and price
of the bread. The Wheat Board regarded the protection of the producers as well as
the millers, bakers and consumers as its main task.
In 1939 the Wheat Board fixed the prices of wheat, meal and bread for the first time
in terms of the Wheat Arrangement Scheme, after which those products could be
sold only at the announced prices. In order to maintain the price of bread at pre-
war levels, producers were paid a subsidy on A grade wheat to compensate them
for increased production costs after the outbreak of the Second World War. During
the 1940/1941 season the government also paid a subsidy to the wheat producers,
50% of which was contributed by the Wheat Board. The official rationale for this
subsidy was to support local agriculture, ensure a low-cost staple food and allevi-
ate inflationary pressure.
In addition to the production of bread, other subtle changes started to creep in
retroactively in the wheat-to-bread chain as the implementation of the Marketing
Act gained momentum in the 1940s. At the beginning of each season the Wheat
Board announced a guaranteed price for wheat on a cost-plus basis. This elimi-
nated the price risk for producers and left them only with the production risk. In
addition, they did not have to be concerned about the marketing of the crop, as
they simply delivered it to the Wheat Board’s agents (mainly co-operatives) and
were paid for it at the prevailing producer price.
Critics of the Wheat Board maintained that the practices and decisions of this
board ultimately led to a number of large firms establishing a monopoly in the
industry. Among other things the Wheat Board decided to implement certain re-
strictive practices such as closing down smaller mills and concentrating the milling
industry around the bigger urban centres. These practices were also expanded to
the baking industry, where the Wheat Board preferred to establish only a few larger
bakeries instead of a larger number of smaller ones.
Deregulation
In 1995 quantitative control was abolished and replaced by tariff control. Buyers
were then entitled to import wheat freely on payment of the levy, and the Wheat
Board was no longer the only seller of wheat in South Africa.
Although the producer price of wheat was still set by the Wheat Board until 1996,
anyone could mill wheat, bake bread and set the price of their bread from 1995.
The only form of government involvement in the bread price was the VAT levied on
white bread, while brown bread was VAT exempt.
On 1 January 1997 the Marketing of Agricultural Products Act of 1996 came into
effect, which meant the end of controlled marketing for wheat and other grain
products. Wheat producers suddenly had to compete in the international market
with less government support than in almost every other industrial agricultural
country in the world. This caused great uncertainty in the wheat industry and some
leaders even felt that this could signal the end of the local wheat industry.
As in the case of maize, domestic wheat prices have been determined on Safex
since price control was abolished.
Rationing
After the outbreak of the Second World War the government started to ration the
consumption of bread to prevent potential shortages, and on 5 May 1941 the pro-
duction of white bread stopped completely. White bread was replaced by what
was known as ‘war bread’. The flour used to bake it was made at a very high
THE PAYMENT OF
SUBSIDIES TO WHEAT
PRODUCERS CONTINUED
UNTIL THE END OF THE
1956/1957 SEASON.
FROM THE NEXT SEASON
SUBSIDIES WERE PAID
ONLY FOR BREAD FLOUR,
AND FROM MAY 1977
THE GOVERNMENT PAID
SUBSIDIES TO BAKERS
ONLY ON FLOUR USED
FOR BAKING STANDARD
BREAD TO KEEP THE PRICE
CONSUMERS PAID FOR
THIS BREAD AS LOW
AS POSSIBLE.