New bill provides for price controls for basic foodstuffs

A proposal to amend the Price Control Act (for Essential Goods) in 2011 has sparked considerable debate in Kenya and could change the framework of the country’s open market economy.

The Price Control Amendment Bill 2024, initiated by UDA-nominated Senator Tabitha Mutanda, would give the Minister of Finance the power to set maximum and minimum prices for essential goods from maize and flour to cooking oil, regardless of prevailing market conditions.

The bill, introduced on November 24, 2023, aims to ensure that basic goods remain affordable for all Kenyans, especially low-income households.

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

“Yes, it is a free market, but at the same time we have to protect consumers,” she explained. “Currently, prices are exorbitant, especially for basic household goods that everyone needs.”

However, the proposal has been sharply criticised by various industry stakeholders, who warn that it could do more harm than good.

Stephen Mutoro, secretary general of the Consumers’ Organisation of Kenya, expressed skepticism, saying: “This is unconstitutional. You cannot set prices if you are not able to control the means of production and supply.”

He warned that price controls could lead to market distortions such as panic buying and black market sales where quality is not regulated.

These concerns were also shared by the Kenya Association of Manufacturers (KAM) and the Retail Trade Association of Kenya (RETRAK), with representatives of both organisations warning that the change in the law could hamper the growth of the manufacturing sector.

Wambui Mbarire, CEO of RETRAK, recalled the pitfalls of previous price control measures and pointed out that such measures could lead to product shortages and disruptions in supply chains.

“This dynamic will distort supply and demand,” Mbarire explained, stressing that retailers need to store their goods profitably.

Tobias Alando, acting managing director of KAM, added that if the government aims to reduce prices, the focus must be on revising tax regulations.

“Reducing taxes on essential goods would automatically lead to a reduction in their prices,” he claimed.

The potential consequences of the law go beyond pricing: industry players warn of a possible decline in product quality.

Alando warned that companies may resort to cheaper raw materials to meet their price targets, which could lead to a loss of quality.

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

Responding to these concerns, Senator Mutinda assured stakeholders that the Kenya Bureau of Standards (KEBS) would continue to do its job of maintaining product quality, stating: “Quality will not decline.”

Despite these assurances, critics are urging lawmakers to rethink the impact of the proposed changes, arguing for a comprehensive review of the entire value chain rather than direct price controls and pointing out that existing indirect price regulations already complicate the market.

As the debate continues, the outcome of the Price Control Amendment Bill will have a significant impact on Kenya’s economy and the availability of essential goods to its citizens.

Opinions on the proposed changes vary, but they reflect a broader conflict between the need for consumer protection and free market principles.

Given stakeholders’ concerns, the government must carefully navigate these complex waters to ensure that any measures taken will actually benefit the Kenyan people without stifling growth or innovation.