Kenya: Return of price regulation

Mathira MP Ephraim Maina has introduced a Bill seeking to empower the Finance minister to set prices of essential goods.

The Price Control (Essential Goods) Bill 2009 proposes to establish a legal framework to have the minister fix maximum retail and wholesale prices for maize, flour, cooking fat, sugar, paraffin, diesel and petrol.

But analysts argue the minister could still invoke an existing and more robust law the Restrictive Trade Practices, Monopolies and Price Control Act enacted in February 1989.

The Act gives the Finance minister powers to set prices for any goods or services.

The Minister may from by order fix maximum prices for the sale, either wholesale or retail, which may include charges for packing and delivery of any goods, Section 35 of the Act says.

The section adds: The Minister may fix a maximum price or a maximum service charge for any area of Kenya which differs from the maximum price or maximum service charge fixed in respect of like or similar goods or services for another area or other areas.

Mr Mainas Bill appears to duplicate the existing Act, but also carries the risk of watering down its more precise provisions.

All that is required is to include whatever information the MP needs in the chapters or sections of the present Act so as to deal with the essential goods, says Mr Ben Musau, a senior partner at BM Musau and Company Advocates.

Mr Musau chaired the Working Committee on Regulatory Reforms for Business Activity in Kenya that helped the World Bank to rank the country among the top five countries in 2007 for introducing reforms that made it easier for businesses to operate.

Unreasonably high

Indeed, the current Act prohibits any person from increasing the price of any goods above the set price.

If anything, Mr Mainas Bill borrows extensively from the Act including its proposal to prescribe the type of packing, weight, size, quality, marking and the processing and ingredients of goods manufactured in Kenya.

In his Memorandum of objects and reasons for the Bill, the MP argues that a few market players who appear to work in cahoots to frustrate the forces of demand and supply dominate the market for most essential goods.

The result of this cartel-like behaviour is that the prices of these goods has remained unreasonably high and out of reach of most of our people even when they should be coming down in light of prevailing international prices and the global recession, he says.

Yet, the Mathira legislators desire to cap prices of essential goods is bound to get public approval.

Many feel that liberalisation has failed not only in Kenya, but also the world over as governments of countries like the US have recently acquired huge stakes in hitherto private companies like American International Group (AIG) in the name of saving them from collapsing.

Powers of supply and demand have been rendered irrelevant as a runaway inflation has pushed the cost of basic commodities, including food, beyond the reach of majority of Kenyans.

Just like across the world, this resulted in food protests in the second quarter of last year, forcing the government to divert development funds to subsidising foods for the poor.

Daily News

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