New Bill proposes to control prices of essential commodities

A proposal to amend the Price Control Act (Essential Goods) of 2011 has stirred significant debate in Kenya, potentially altering the landscape of the country’s open market economy.

Spearheaded by UDA-nominated Senator Tabitha Mutanda, the Price Control Amendment Bill, 2024 seeks to empower the Treasury Cabinet Secretary with the authority to set maximum and minimum prices for essential goods ranging from maize and flour to cooking oil regardless of prevailing market conditions.

Introduced on November 24, 2023, the Bill aims to ensure that basic commodities remain affordable for all Kenyans, particularly low-income households.

Senator Mutinda argues that the legislation is necessary to shield consumers from exploitation by unscrupulous traders.

"Yes, it’s a free market, but at the same time, we need to protect consumers," she stated. "Right now, prices are exorbitant, especially for essential household commodities that everyone needs."

However, the proposal has faced sharp criticism from various industry stakeholders, who warn that it could do more harm than good.

Stephen Mutoro, Secretary General of the Consumer Federation of Kenya, expressed skepticism, stating: "It’s unconstitutional. You can’t set prices if you're not able to control the means of production and supply."

He cautioned that price controls could lead to market distortions, such as hoarding and black market sales, where quality is unregulated.

These concerns were echoed by the Kenya Association of Manufacturers (KAM) and the Retail Trade Association of Kenya (RETRAK), with leaders from both organizations warning that the amendment could stifle the growth of the manufacturing sector. 

Wambui Mbarire, CEO of RETRAK, recalled the pitfalls of past price control measures, noting that such policies could lead to a lack of product availability and distorted supply chains.

"The dynamic will distort supply and demand," Mbarire explained, emphasizing the need for retailers to profitably stock goods. 

Tobias Alando, Acting CEO of KAM, added that if the government aims to reduce prices, revising taxation regulations should be the focus.

"Reducing taxes on essential goods would automatically lower their prices," he asserted.

The potential ramifications of the Bill extend beyond pricing, with industry players warning of a possible decline in product quality.

Alando cautioned that companies may resort to cheaper raw materials to meet price targets, leading to compromised quality.

"If we use cheaper materials due to price controls, the quality of products will inevitably decline," he warned.

In response to these concerns, Senator Mutinda assured stakeholders that the Kenya Bureau of Standards (KEBS) would continue its mandate to uphold product quality, stating, "The quality won’t come down."

Despite these assurances, critics are urging lawmakers to reconsider the implications of the proposed amendments, advocating for a comprehensive review of the entire value chain rather than implementing direct price controls, and suggesting that existing indirect price regulations already complicate the market.

As the debate unfolds, the outcome of the Price Control Amendment Bill will significantly impact Kenya's economy and the accessibility of essential goods for its citizens.

With opinions divided, the proposed changes reflect a broader struggle between the need for consumer protection and the principles of free-market economics. 

As stakeholders voice their concerns, the government must navigate these complex waters carefully to ensure that any measures taken truly benefit the Kenyan populace without stifling growth or innovation.