Exporters slam new Kenya price-fixing Bill
Jun 27, 2010
THE local business community may not fully reap from the booming cross-boarder trade for consumer commodities following the passing of a new Bill by the Kenyan Parliament seeking to allow the treasury to fix prices of essential goods.
By Emojong Osere
THE local business community may not fully reap from the booming cross-boarder trade for consumer commodities following the passing of a new Bill by the Kenyan Parliament seeking to allow the treasury to fix prices of essential goods.
The Bill allows the Kenyan government to determine the cost of petrol and diesel, maize, maize flour, sugar, rice, wheat, wheat flour, kerosene and cooking fat.
This implies that Ugandan companies exporting the products to Kenya would have limited alternatives since they would be forced to sell at the dictated prices or look for alternative markets in the region in case the overheads they incur through exporting to Kenya surpass sales returns.
The decision announced last week comes less than a week to the start of the implementation of the EAC common market under, which there will be free flow of goods and factors of production across the region.
Analysts argued over the weekend that the move could be a trade barrier aimed at discouraging foreigners from out-competing Kenyans dealing in the same commodities.
“It is all about checking competition,†Makerere University economics lecturer, Dr. Thomas Bwire, said.
“If a Ugandan exporter took commodities to Kenya and found that the price is less than the intended charge with respect to the production costs, it would be ridiculous if such a businessperson thought of returning to such a market,†he explained adding that forces of demand and supply should be allowed to determine commodity prices.
The Bill, The Price Controls (Essential Goods) Bill, 2009, if assented to by Mwai Kibaki, the Kenyan president, authorises the finance minister to fix the maximum retail and wholesale prices for essential commodities.
It criminalises buying or selling of the listed goods at a price above the maximum price fixed by the government and breaking the rule would lead to imprisonment for five years or to a fine of Ksh1m (about sh27m), or both.
Uganda remains one of Kenya’s closest trading partner in the world.
The Uganda Exports Promotions Board figures show that in 2008, Uganda’s formal exports to Kenya were worth $164m (about sh360b), up from $118m (sh259.6b) the previous year.
Informal exports (services) earned $108m (about sh237.6b).
As the Bill stands, it is clear that Ugandan exporters were headed for a big bang since most exports to Kenya are agricultural produce including maize, rice, wheat and maize flour, whose prices are yet to be determined by the treasury.
Uganda is also yet to start oil drilling, refining and exportation.
Since the prices of petrol and diesel are to be set by the Kenyan government, it would be imperative if Uganda went back to the drawing board and negotiate clear trade terms.
David Mangeni, the managing director of Busia Grain Millers, one of the millers seeking to start the exportation of maize flour to Kenya, said they would seek the EAC Secretariat’s intervention.
“For the sake of promoting the spirit of integration, they should have involved regional governments,†he pointed out.
“The EAC Secretariat should help us.â€
MW Weber, the managing director of Rhino Industries, said the move would kill industries as it does not consider individual industry costs.
The Association of Local Uganda Sugar Manufacturers said the law would deter the development of the industry because of the high costs involved in sugar production.
But Kenya argued that the Bill seeks to protect the common man from exploitation from middlemen who charge exorbitant prices.
THE local business community may not fully reap from the booming cross-boarder trade for consumer commodities following the passing of a new Bill by the Kenyan Parliament seeking to allow the treasury to fix prices of essential goods.
The Bill allows the Kenyan government to determine the cost of petrol and diesel, maize, maize flour, sugar, rice, wheat, wheat flour, kerosene and cooking fat.
This implies that Ugandan companies exporting the products to Kenya would have limited alternatives since they would be forced to sell at the dictated prices or look for alternative markets in the region in case the overheads they incur through exporting to Kenya surpass sales returns.
The decision announced last week comes less than a week to the start of the implementation of the EAC common market under, which there will be free flow of goods and factors of production across the region.
Analysts argued over the weekend that the move could be a trade barrier aimed at discouraging foreigners from out-competing Kenyans dealing in the same commodities.
“It is all about checking competition,†Makerere University economics lecturer, Dr. Thomas Bwire, said.
“If a Ugandan exporter took commodities to Kenya and found that the price is less than the intended charge with respect to the production costs, it would be ridiculous if such a businessperson thought of returning to such a market,†he explained adding that forces of demand and supply should be allowed to determine commodity prices.
The Bill, The Price Controls (Essential Goods) Bill, 2009, if assented to by Mwai Kibaki, the Kenyan president, authorises the finance minister to fix the maximum retail and wholesale prices for essential commodities.
It criminalises buying or selling of the listed goods at a price above the maximum price fixed by the government and breaking the rule would lead to imprisonment for five years or to a fine of Ksh1m (about sh27m), or both.
Uganda remains one of Kenya’s closest trading partner in the world.
The Uganda Exports Promotions Board figures show that in 2008, Uganda’s formal exports to Kenya were worth $164m (about sh360b), up from $118m (sh259.6b) the previous year.
Informal exports (services) earned $108m (about sh237.6b).
As the Bill stands, it is clear that Ugandan exporters were headed for a big bang since most exports to Kenya are agricultural produce including maize, rice, wheat and maize flour, whose prices are yet to be determined by the treasury.
Uganda is also yet to start oil drilling, refining and exportation.
Since the prices of petrol and diesel are to be set by the Kenyan government, it would be imperative if Uganda went back to the drawing board and negotiate clear trade terms.
David Mangeni, the managing director of Busia Grain Millers, one of the millers seeking to start the exportation of maize flour to Kenya, said they would seek the EAC Secretariat’s intervention.
“For the sake of promoting the spirit of integration, they should have involved regional governments,†he pointed out.
“The EAC Secretariat should help us.â€
MW Weber, the managing director of Rhino Industries, said the move would kill industries as it does not consider individual industry costs.
The Association of Local Uganda Sugar Manufacturers said the law would deter the development of the industry because of the high costs involved in sugar production.
But Kenya argued that the Bill seeks to protect the common man from exploitation from middlemen who charge exorbitant prices.