Impact of High Food Prices On The Poor In Kenya: Can Anything Be Done For The Kumbafus?

One of the things that has had a major impact on the life of the ordinary Kenyan has been the unprecedented steep and continuous increase in food prices that has been experienced during the Kibaki administration. On the surface of things, this is a topic that many will quickly dismiss. After all the Kenyan economy is liberalized and the government really does not have any control on food prices.

Supporters of the current administration have been very quick to point out that any blame on the Kibaki administration over escalating food prices is very unfair and completely unjustified, but is this really true?

This blogger would beg to differ. The current government has all the power at it's disposal to ensure that food prices, especially where essential items are concerned, remain as low as possible. Sadly this has not been one of the priorities of the Kibaki administration. Former president Moi had mechanisms in place to closely monitor food prices as this was seen as a potential source of possible dissent and instability during the dark one party era. Probably the most memorable incident that highlights this fact was when the prices of consumer goods were liberalized in the late 80s and the then East African Industries under the chairmanship of Joe Wanjui tried to raise prices. The increases touched on virtually every item in the long list of consumer products the multinational dealt with then. There was such political heat generated from State house that it sent the wrong signals to investors who had been long looking forward to the abolition of price controls in Kenya so as to invest or increase their investment in the country. Wanjui and company however hurriedly withdrew their proposed price increases. It is worth noting that the same Joe Wanjui is one of President Kibaki's most trusted advisors currently.

Food prices in Kenya have risen very rapidly and steeply since 2003 and the result has been that putting food on the table has become a daily struggle for most Kenyans. That is why it is so difficult to sell the idea of an improved economy to any ordinary Kenyan today.

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One of the things that a Kenyan government can do to keep prices low is to abolish Value Added Tax (VAT) from essential goods and food products. Currently VAT stands at a whooping 16 per cent, and abolition of the tax on certain essential food and consumer products would have an immediate impact on reduction of prices. They would immediately cost 16 per cent less. There are many creative ways of recovering the lost revenue that the exchequer would suffer from such a move including increasing taxes on luxury, non-essential products and charging the rich and affluent higher indirect taxes in neighborhoods where they usually live and do their shopping.

One of the main reasons why food prices have increased so dramatically since 2003, has been the increased power and arrogance of cartels. Incase you were not aware, powerful cartels control prices in virtually every key sector of the Kenyan economy today. A good example here is the powerful Coast-based sugar cartel that has been in existence since the Moi days and has milked billions from the economy. Thanks to this cartel, the price of sugar has sky-rocketed in recent times and is still way above the norm. So powerful is this cartel that the idea of selling sugar directly from the large factories like Mumias to consumers has been ruthlessly and quietly fizzled out, to ensure that Kenyans continue to pay the high prices. We are probably financing the forthcoming elections.

These cartels are the main reason why despite the rapid strengthening of the Kenyan shilling against major foreign currencies, most notably the dollar, the benefits have not been passed on to the consumer. If anything prices have continued to rise almost at par with the strengthening Kenyan shilling. Ridiculous but true.

What many do not know is that during the Moi days, these cartels were afraid that if they went overboard, President Moi was the sort of leader who would wake up one morning and put them out of business at some roadside declaration with just a few angry remarks. So they were careful to behave themselves and put their greed in check. In the Kibaki administration the cartels have had a field day. Nobody is scared of the president anymore and the laid back-see-no-evil-slow-to-show-any-signs-of-a-reaction Kibaki style of governing has been perfect for making windfall record profits at the expense of the struggling ordinary Kenyan.

If you do not believe that price cartels are widespread in the Kenyan economy let me give you a simple example that will shock you. The two major daily newspapers in the country who between them sell well over 95 percent of the daily newspapers sold in the country, have a "gentleman's agreement" that when one of them wants to raise their cover price, they simply inform the other in advance so that both newspapers will revise their prices upwards on the same day. Incidentally we are in an election year and the newspapers are rubbing their hands in glee and licking their lips in anticipation of record sales and profits. I will be very surprised if we do not see another increase in daily newspaper cover prices this year, especially as the elections draw nearer.

Finally (at least for today, because this article is getting too long) there is the "cost of corruption." Every businessperson knows that to get your goods cleared quickly at the Mombasa port, you must "do the necessary." Naturally this cost is quickly passed on to the consumer in higher prices. There has been much talk from this government about zero tolerance to corruption. However actions usually speak much louder than mere words and this government's actions have been contrary to what they have said in official statements. In fact this government has been an "excellent role model" in corruption through scandals like the still un-resolved Anglo leasing affair.

So what all this means is higher and-still-rapidly-rising-food-prices for ordinary Kenyans which just goes to speed up further the widening gap between the rich and the poor in Kenya.

A Kenyan safari of a lifetime at a price you will not believe.

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