Concerns raised in the Price Control Bill could be addressed through amendments to the Competition Act, or by inserting a chapter on essential goods price control.
Since the 1990s, Kenya has embraced a free-market approach that has spurred economic growth and attracted investment. Price controls, however, threaten to reverse these gains by imposing artificial restrictions on the market. Historically, price controls have led to shortages, black markets and underinvestment.
During Kenya’s era of price controls, long queues formed at shops selling basic commodities as consumers rushed to stock up before announcements of adjustments.
Shortages became the norm as shopkeepers hoarded items anticipating price increases that would allow them to sell old stock at higher margins.
This illustrates the inefficiencies that price controls introduce into an economy.
Capping prices discourages producers from supplying goods at artificially low prices, leading to shortages. At the same time, black markets emerge, with goods sold at much higher prices outside the formal economy, undermining the purpose of the controls.
Conversely, oversupplies can occur when prices are set too high, distorting the market.
Businesses are also likely to reduce investments in sectors where price controls are imposed, leading to underinvestment and stagnation in production capacity. These market inefficiencies are a recipe for economic decline.
Robust competition and consumer protection laws already exist
Kenya already has a robust framework to address unfair pricing and protect consumers. The Competition Act of 2012 established the Competition Authority of Kenya (CAK), tasked with promoting healthy rivalry, preventing misleading market conduct, and investigating anti-competitive practices.
The Consumer Protection Act, enacted the same year, further strengthens consumer rights by prohibiting unfair practices such as false representation and unconscionable conduct.
The CAK has a proven track record of intervening in the market to address price manipulation and ensure consumer welfare. It has successfully dismantled cartels and penalised businesses that exploited dominant market positions. These interventions demonstrate that Kenya already possesses mechanisms to curb abusive pricing practices without needing a separate price control regime.
Rather than creating a new administrative body, a better approach would be to amend the existing Competition Act to address price gouging and market distortions related to essential goods.
This would ensure that price regulation remains a tool of last resort, deployed only when the market is unable to self-correct. Establishing a new Price Control Unit would waste public resources, duplicating functions that the CAK is already equipped to perform.
Price controls fail to address the underlying causes of price increases. For essential goods, these causes might include supply chain disruptions, high production costs, or market inefficiencies.
Rather than artificially capping prices, the government should focus on alleviating these root causes. Investments in infrastructure to reduce transportation costs, subsidies for key agricultural inputs, and trade policy adjustments could help lower production costs and increase supply, thereby stabilising prices naturally.
The government has already begun initiatives to address these issues, such as building markets and produce aggregation centers in counties and subsidising farm inputs to help farmers bring their produce to market more affordably and efficiently. These are the kinds of long-term solutions that will ensure price stability without undermining the principles of a free market.
Legislative harmonisation
Rather than introducing a resource-intensive price control unit, Kenya should explore legislative harmonisation.
Concerns raised in the Price Control Bill could be addressed through amendments to the Competition Act, or by inserting a chapter on essential goods price control.
This would avoid unnecessary duplication of efforts and administrative costs while ensuring that price regulation is integrated into the broader economic framework.
Creating another bureaucracy to handle price controls would be wasteful, particularly given the strain on Kenya’s public finances. With limited resources, it makes far more sense to strengthen existing institutions, such as the CAK, which are already equipped to handle market distortions.
Conclusion
Kenya’s free-market economy has been a cornerstone of its economic progress and introducing price controls would be a step backward toward the inefficiencies of a command economy.
Kenya already has robust competition and consumer protection laws in place, and the CAK has demonstrated its effectiveness in curbing anti-competitive practices.
Instead of embracing a flawed price control regime, the government should focus on addressing the root causes of price increases and strengthening its existing legislative framework. By doing so, Kenya can protect its consumers without sacrificing liberalisation gains.
The writer is a data protection lawyer and writes on topical issues
