Over the past two years the prices of basic goods such as food and fuel have increased sharply, causing significant hardship for the poor, who were already spending 70% of their daily income on food. Kenya’s members of parliament have now passed a bill allowing the finance minister to set maximum prices for basic goods. While at first glance this might seem a good idea, in practice it is likely to lead to increased hardship.
Food prices in Kenya rose after last year’s crop was a small one. The small size of the crop was partly due to predictable lack of rain resulting from climate change and partly due to reductions in crop planting as a direct outcome of the months of political violence following the most recent disputed elections. There was also some suspected manipulation of supply by politicians for the purposes of profiteering.
The problem is, as Robert Mugabe has found out in Zimbabwe, that when you try to control the maximum prices for goods, those goods simply disappear from shop shelves, as no rational retailer will stock goods if there is no prospect of making a profit on them. To limit prices, what the government really needs to do is address the root causes of high prices, such as poor transport infrastructure and unproductive farming techniques.