Kenyan consumers need not a prices but a cartel-control legislation

Finance Minister now wields sweeping powers to gazette “essential” commodities and proceed to fix their respective price ceilings on condition that he “consults” the equally unspecified “industry”, which has been variedly interpreted to mean manufacturers, importers, distributors and possibly retailers.

The capacity for Treasury to reduce foreseeable bureaucracy and red tape on implementing the latest law, without first publishing guidelines, is a question whose answer is pending. But that is a debate for a different occasion.

As of now, the country needs to welcome the latest offering from government on account of commodity prices of various items having either doubled or tripled since January.

At best, it is a revelation that the crippling high cost of living has finally received the much needed personal attention of President Kibaki albeit several months later.

But it is also fair to note that it could be a score where goalposts are non-existent. As such, it could be the right answer to a wrong question. This is why;

First, the problem with the current high cost of living today, apart from being a global challenge, is simply and squarely a governance problem. It is a combination of implicit and explicit graft, impunity exercised by powerful and shadowy cartels, poor legislation and weak oversight institutions.

All this point to one thing – Kenya does not have sufficient political goodwill to protect consumers. With a skewed or a weak market regulation, the resultant cost of production is often high. This cost plus the margins are always absorbed by the consumer.

Second, the aspect of consumer goods pricing can never be a permanent fixation. It is has to remain dynamic and be seen to freely oscillate within the liberalized market forces of supply and demand.

Indeed successful entrepreneurs will often confirm that their secret is often about the lowest convergence point between the twin aspects of quality and pricing of goods and services they sell.

To want to set the pricing even for a week, a month or a year is to therefore make nonsense of many business plans and the reality that hard times change. As such, the law should have been seen as a stop gap measure as it may not apply when inflation subsides.

Third, Kenya’s regulatory regime suffers from either acute apathy on oversight or it fatally weak. From Capital Markets Authority to Energy Regulatory Commission; National Environment Management Authority to Communications Commission of Kenya many examples abound where this key institutions end up, on a number of occasions, as reactionary toothless bulldogs.

Having appreciated this development, the government operationalized the Competition Act, Cap 504 from 1st August. Almost two months later, the law remains impotent as Finance Minister is yet to constitute the board of the envisaged Competition Authority and which appointees must be vetted by Parliament.

If it would have been implemented from last month, the Competition Act would to a large extent achieved several times better than what the Price Control (Essential Goods) Act may achieve, if anything.

Fourth, the consistency of the new law with various government policies such as Vision2030 as well as the Constitution is in doubt. If the import of controlling commodity prices was about consumer protection, as it has been widely cited, then it remains inconsistent with provisions of Article 46 on Consumer Rights.

The supremacy of the constitutional provisions over Acts of Parliament cannot be gainsaid. As such, it is very unlikely that the new law will survive a judicial review challenge from an aggrieved consumer or businessperson. That reality could be coming sooner than later.

As such, one would be rightly argue that enacting the Consumer Protection Bill envisaged under Article 46 would have been far more urgent than the gamble being entertained in the new law which was sponsored by Mathira MP Mr Ephraim Maina.

Fifth, the new law could spell a death knell or absolute irrelevancy to anticipated report of Mr Ababu Namwamba’s Parliamentary Committee on High Cost of Living – which committee has been on an endless spree of extending its duration.

Six, it is not right for government to settle for price fixing when it clearly does not own any means of production. As such, fears are rife that cartels would now perfect their art of hoarding off commodities. If what has been witnessed on sugar will apply to all “essential” goods, then consumers must warm up to an uninviting Christmas season.

The choice of diction is as intriguing as the law itself. “Consult”, for instance, is such an ambiguous word. What if the envisaged consultations with the “industry” fail and the Finance Minister goes ahead to fix prices? Will he still order the “industry” to put up the goods on the market if they are against it?

From the foregoing, One would expect the fresh Attorney General Prof Githu Muigai to immediately advise his fellow MPs and Cabinet colleagues that the Price Control (Essential Goods) Act 2011 is in need for either an overhaul or major and urgent amendments.

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