For a business, interaction with the State is usually restricted to seeking a licence, periodic inspection and hopefully, during each budget when policy changes around taxation and rarely when it offers incentives.
Yet, that line between business and Government is disturbingly being breached by the national and some county government as populism decisions replace sound economic policy. The invisible hand of demand and supply is increasingly being replaced by the visible hand of Government, as free pricing gives way to price controls.
In Nairobi County, Governor Mike Sonko has got himself and his gang of county askaris a new task of walking into retail outlets to ensure that all the price tags on unga packages do not read a price of more than Sh75.
Those found to have flouted this have been arrested or harassed. They do not want to consider a retailer’s cost of getting that unga on the shelve or his or her profit margin. Yet, the price control on unga is just a pronouncement that has no legal backing.
Although Kenya has The Price Control Act, 2010, which gives the Government powers to determine the price of essential commodities such as unga, the Cabinet Secretary for Agriculture Mwangi Kiunjuri did not consult all the players in the business of selling unga nor did he gazette the policy as the law requires.
“As much as it is a free market, every responsible Government must ensure that it protects its people,” said Kiunjuri at a press conference that was also attended by millers under their umbrella body, the United Grain Millers Association.
The Secretary-General of Consumers Federation of Kenya (Cofek) Stephen Mutoro says what is happening amounts to “lawful hooliganism.” “All these are symptoms of a dysfunctional market that arises out of absent or skewed regulations,” explained Mutoro, noting that in many cases the Government cannot purport to regulate prices.
Mutoro, who has been a staunch supporter of the law capping interest rates on loans, says it is difficult for the Government to control prices of fast moving consumer goods. And Kiunjuri is not alone.
It seems like as the Government’s regulatory capabilities become stretched, it has resorted to a lazy approach to fixing prices. A fortnight ago, the Cabinet Secretary for Health Sicily Kariuki said they were working on price control for drugs which have been the single largest expenditure for those seeking treatment.
She noted that county governments would have to adhere to the prices set for drugs and non-pharmaceutical products. “The county governments we have talked to are happy with the idea,” said CS Kariuki. Health economists, however, argue that the Government’s approach to addressing the cost of medication should be systematic.
Dr Nelson Gitonga, a health economist, says that the Government should comb through the entire value-chain and find out where there are inefficiencies so as to address the problem. Dr Gitonga said controlling the price of drugs might help inpatient and outpatient care where the cost of a drug is the largest component, but for inpatient, the cost of is driven up by other fees.
“Even if you control cost without managing poly-pharmacy it is an exercise in futility. They will just increase the volume of drugs,” says Dr Gitonga. Poly-pharmacy is the practice of administering many different medicines to a patient. Almost every institute wants prices to be controlled. Even accountants want a price floor on their fees.
The chairman of the Institute of Certified Public Accountants of Kenya (ICPAK) Julius Mwatu, has turned to the Treasury to push the Competition Authority of Kenya (CAK) to give members the green light to prescribe minimum fees for each category of service in non-assurance, company audits, saccos, pension schemes and public benefit organisations.
via @PerilOfAfrica Is Kenya sliding into scary market controlled economy? https://t.co/86jfas5sYt **AUTOMATED NEWSFEED pic.twitter.com/bo1XDci65n
— MarthaLeah Nangalama (@mlnangalama) October 16, 2018
Is Kenya sliding into scary market controlled economy? https://t.co/8Oxh69a37u
— Crwe World (@CrweWorld) October 16, 2018