Kenya’s Expanding List of Price-Controlled Commodities Raises Economic Concerns

Nairobi, December 29, 2024 – The Kenyan government has recently added macadamia nuts to its list of commodities under price control, setting a minimum purchase price at Sh100 per kilogram. This move is part of a broader strategy to extend control over the prices of essential products, a list that may soon include cooking gas, bitumen, and heavy fuel oil following recent Cabinet approvals.

This development comes amidst longstanding price controls on key staples such as tea, wheat, and fuel, which have been a point of contention regarding their economic impact. The introduction of the Price Control (Essential Goods) (Amendment) Bill, 2024, seeks to empower the Cabinet secretary for the National Treasury to set both minimum and maximum retail and wholesale prices for critical food products and certain pharmaceutical drugs.

Government’s Stand and Industry Reactions The government defends its policy as a measure to protect consumers and assist farmers in fetching better prices. However, the results have been mixed. While some argue that such measures protect consumer interests, particularly in monopolistic sectors like electricity, others believe they stifle competition and innovation.

For instance, the regulation of electricity prices by the Energy and Petroleum Regulatory Authority (Epra) every three years considers factors like revenue requirements and power purchase costs to balance stakeholder interests. In contrast, the tea sector experienced significant drawbacks when former President Uhuru Kenyatta’s minimum price led to unsold stock and market disruptions.

Unintended Economic Consequences Price controls have historically shown their double-edged nature. “While intended to solve pricing issues, these controls have sometimes led to unintended consequences,” remarked Abubakar Hassan, Investments Promotion Principal Secretary. For example, the tea sector’s struggles culminated in lifting the minimum price in August, a change that was welcomed by both dealers and farmers, resulting in increased sales at auctions.

Industry Experts Weigh In The Kenya Association of Manufacturers (KAM) has expressed concern that reintroducing stringent price controls could hinder small and medium-sized enterprises (SMEs) from thriving. KAM CEO Tobias Alando argued that addressing the root causes driving up essential product prices would be more effective than imposing price ceilings. He emphasized that such measures could dampen manufacturers’ motivation to enhance product quality.

As Kenya navigates these economic adjustments, the debate continues on the best approach to balancing consumer protection with market health and competitiveness. The outcome of these policies will likely shape the nation’s economic landscape in the coming years, impacting everything from market dynamics to consumer prices and industry investments.