Neighbourhood Kenya 20th Edition - Kara

More documents

Recommendations

Info

ECONOMY Cartels reap from miseries of poor Kenyans In August 2011, Kenya was suddenly hit by an acute sugar shortage. Then, a 2kg packet was retailing at between Sh195 and Sh200 supermarkets. A few packets of sugar were, however, available on the shelves but with a caveat: ‘don’t pick more than one packet’. The price had, however, doubled to Sh400. Stakeholders in the industry and government offi cials quickly blamed the shortage on the refurbishment of a major plant in the country and promised that supply would be restored within no time. True to their word, constant supply was restored -but the prices still remained high. This epitomizes the vulnerability of Kenya’s economy to manipulation by profi teering businessmen who work as a cartel with the blessings of corrupt government offi cials. Unfortunately for poor wananchi, the cartels have fi rm grip on all key sub-sectors including oil, sugar, maize and transport. They dictate prices in a bid to make a killing. As a result, a helpless -perhaps unwilling- government has resorted to desperate measures of fi xing prices in order to quell disquiet among an overburdened populace. In September last year, Mathira MP Ephraim Maina sponsored a Bill, Price Control Bill (Essential Goods), in parliament to give powers to Finance minister to set prices for essential commodities. Defending his Bill, which is now an Act, Maina said it would deal with cartels in the food industry, which have been charging exorbitant prices for their commodities. Maina argues that Kenyan economy is a market full of cartels rather than a free market economy. The legislator cited cartels in the fi nancial, food, fuel and utility sectors, saying these people collude to fl eece consumers. Gwassi MP John Mbadi, also says the fair competition notion in Kenya has been replaced with cartelism extorting and exploiting Kenyans. “Look at the petroleum industry, it is just a cartel profiting at the expense of Kenyans to the extent that we have even had a company like Kenya Power making huge profi ts at the expense of the economy. This is not a free economy. It is an economy that is being controlled by cartels and the government has been doing very little,” charged Mbadi. His sentiments were echoed by Defence assistant minister David Musila, who said the idea of removing price controls was good but experience had shown that creating a free economy had not worked. “We have managed to create billionaires at the expense of ordinary Kenyans. We have suffered at the expense of cartels. We have seen people hoarding sugar and importing it in order to benefi t from wananchi,” said Musila. In 2010, the government also started to set maximum fuel prices through the Energy Regulatory Commission. This move was prompted by public condemnation of the oil marketers after studies confi rmed they were operating as cartels. However, ERC has been unable to rein in cartelism in the oil industry. Just last month, a severe fuel shortage hit Kenya when the commission reduced fuel prices with profiteering oil marketers being accused of hoarding the all-important commodity to force a review in prices. However, the marketers explained that 16.
ECONOMY XXXXXXXX PROFILE the shortage had been occasioned by a projection of price reduction by ERC a week prior to the effective date. Through their lobby, the Petroleum Institute of East Africa (PIEA), the marketers said outright knowledge that prices would be coming down a week in advance saw a number of players engage in practices that might be detrimental to both industry and general public. “We would like to advise that the regulator takes caution in making provisional petroleum price announcements in advance and instead revert to announcement of said prices on the 15th day of the month as stipulated by relevant regulations,” said Wanjiku Manyara, PIEA general manager. Nevertheless, experts say Kenya’s economy is fi rmly in the hands of cartels. In a paper, “Inflation and Exchange Rate in Kenya: Why we Must Act Decisively”, released in October last year, the Parliamentary Budget Office expressed concerns that there was a possibility that price of most essentials goods and services like foodstuffs, oil and transport are controlled by cartel-like behaviour. The paper concluded that it was highly likely that if the government makes heavy investment in mass transport, foodstuffs and oil storage facilities, it can effectively regulate the prices of such commodities. In March 2011, Joseph Kieyah of the Kenya Institute for Public Policy Research and Analysis (Kippra), in “The Study on Petroleum Industry in Kenya, found that since 2005, petroleum pump prices have been surging at relatively higher rate than crude oil, implying a cartel-like pricing approach by the major oil companies. “Given that the market structure of the petroleum industry could facilitate cartelization, we assume the oil companies behave like a cartel,” concluded Kieyah. An Inter Ministerial Taskforce set up in 2005 to investigate cartel-like behaviour of major oil companies in Kenya also found cartel-like behaviour by the major oil companies. Besides the oil, the matatu industry is also controlled by cartels and gangs that set exorbitant fares at the bus stop and extort from the crews ostensibly for protection purposes. Successive Finance ministers in their budget speeches have banned touting at the bus termini to rein in the behaviour but this did not help. The smartest measure was to stop registering 14-seater matatus and forcing all PSVs to be registered under a Sacco. But the extortionist groups have crafted a way to defeat this initiative by rushing to register Saccos and making genuine matatu owners join in as members. As a result, Kenyans continue to be overcharged for transport to cater for the interests of the cartels. We have managed to create billionaires at the expense of ordinary Kenyans. We have suffered at the expense of cartels. We have seen people hoarding sugar and importing sugar in order to benefit from wananchi 17.
Page 1: MARCH 2012 20TH EDITION neighbourho
Page 4 and 5: COVER STORY From Page 3 New justice
Page 6 and 7: PERSPECTIVE Italian Ambassador: The
Page 8 and 9: security Police Reforms: Is a civil
Page 10 and 11: FOCUS As 2012 maneuvers the teethin
Page 12 and 13: ADVERTORIAL HIGH QUALITY MEAT PRODU
Page 14 and 15: TRANSPORT Mixed reactions over phas
Page 18 and 19: INFRASTRUCTURE Blessings and curse
Page 20 and 21: MESSAGE NEWS One of the key pillars
Page 22 and 23: NEWS 02 Feb - KARA Lamu County Prof
Page 24: Partnerships for the awards are inv

Neighbourhood Kenya 20th Edition - Kara

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?