•Specifically, the Bill seeks to empower the CS to fix both minimum and maximum retail and wholesale prices for essential goods such as maize, maize flour and wheat.
•Others are rice, cooking oil, sugar, and certain pharmaceutical drugs.
Manufacturers are concerned that Kenya's planned price control on key commodities will choke businesses, mainly SMEs and could lead to job cut and closures.
The Price Control (Essential Goods) (Amendment) Bill, 2024 sponsored by nominated senator Tabitha Mutinda seeks to amend the 2011 Act.
"This Bill seeks to amend the Price Control (Essential Goods) Act, 2011 to regulate the prices of essential commodities in order to secure their availability at reasonable prices for all Kenyans, especially the low-income earners," the Bill which has already gone through the first reading states.
It specifically seeks to empower the National Treasury Cabinet Secretary to fix both minimum and maximum retail and wholesale prices for maize, maize flour, wheat, wheat flour, rice, cooking oil, sugar, and certain pharmaceutical drugs.
The CS will create a Price Control Unit within the Ministry to monitor, enforce, and analyse pricing trends to ensure compliance with the price controls; and provide incentives to farmers, manufacturers, and retailers involved in the production and distribution of essential goods.
The Kenya Association of Manufacturers (KAM) however says the move will have long-term implications.
“First, it will stifle competition, particularly among small and medium-sized enterprises (SMEs), who are likely to struggle to sustain operations under stringent price controls. This could lead to market monopolisation by larger firms, reducing overall market competition,” KAM acting chief executive Tobias Alando said.
If the regulated prices are lower than production costs, this could lead to financial losses, potential layoffs, or even market exits of players in the food sector, he added.
With price ceilings in place, manufacturers will also have less incentive to innovate or improve product quality, as they might not adjust prices to reflect enhanced value, the KAM leadership has further noted.
This could lead to stagnation in product development and reduced consumer choice.
“Lastly, it is likely to lead to supply chain disruptions if manufacturers reduce production in response to unprofitable price controls. This might result in shortages of essential goods, driving consumers to seek alternatives in an unregulated market,” said Alando.
While there is need to address the high cost of living that remains a headache for many households in the country, manufacturers are proposing the addressing of underlying issues that drive up the price of essential goods in the country, mainly taxes.
“Unfortunately, the Bill focuses on symptoms rather than root causes. In this case, it is crucial to replace price controls with expanded and better-targeted social safety nets, coupled with reforms to encourage competition and a sound regulatory environment that would have a better effect on economic growth and increase citizen’s disposal income,” said the KAM CEO
KAM has since asked the government to instead address systemic challenges, such as prohibitive tax regime, high cost of raw materials and high cost of energy and corruption that impact the cost of production, to reduce the prices of essential goods.
“There is a need to regulate the current trend of runaway taxation. By tackling these issues, the cost of production will naturally decrease, leading to lower prices for consumers without the need for stringent price controls as the market will regulate itself,” Alando said.
Private sector players have also called on the government to adopt policies that promote free and fair competition, enhance consumer awareness and empowerment, and support the development and diversification of the Kenyan economy.
Senator Mutinda argues that the Bill if enacted, would prevent essential goods and services from becoming unaffordable to the public.
It will also stabilise prices of essential goods in order to ensure that the cost of living remains manageable.
“The enactment of this law will also ensure that Kenyans are protected from exploitative and unscrupulous businesspersons,” the Bill states.
The proposed law also seeks to prevent sudden variations in price of essential goods that may lead to a decrease in purchasing power and a decline in overall consumer welfare.
Currently, the government, through the Energy and Petroleum Regulatory Authority sets monthly prices for petroleum products based global market trends and import costs, amid numerous taxes.
There has also been a push to set prices for cooking gas.