• Politicians are considering price controls for maize, wheat, rice, sugar, and cooking oil.
• Price controls will lead to shortages, according to the economic law of supply and demand
The Price Control (Essential Goods) Amendment Bill 2024 proposes to introduce price controls for maize, wheat, rice, sugar, cooking oil and other items.
It is a private members Bill introduced by Senator Tabitha Mutinda but nevertheless it is a serious threat to the Kenyan economy.
Price controls are tempting, the world would indeed be a better place if all essential items were easily affordable. But unfortunately price controls don't work like that, they will only result in goods becoming unavailable unless the consumer pays extra.
The law of supply and demand is a fundamental of economics. If there is over-supply, prices go down and if there is under-supply, prices go up. If prices are too high, demand decreases and if they are too low, demand increases.
Price controls will lower prices so demand will increase, resulting in shortages.
Simultaneously, manufacturers will have lower profit margins, or will even make losses, so they will pull out of production, further increasing shortages and pushing up prices on the informal market.
Introducing price controls on essential commodities like maize meal would be a disaster. All it would achieve would be to reduce supply. The politicians behind this legislation would become less popular, not more popular.
Quote of the day: "Superhuman effort isn't worth a damn unless it achieves results."
Ernest Shackleton
The English explorer rescued his men from Elephant Island on August 30, 1916