Skip to main content

Kenya, regulated oil prices, taxing keg, and the laws of unintended consequences

Laws to stop Kenyans from being exploited have instead entrenched the
exploitation in law. Image - oilnewskenya.com
Kenyans love laws. The unmistakable belief that a law will make certain undesirable habits change because of the consequences of breaking such laws is common here. It is however lost on these Kenyans that even they themselves break many laws, with abandon.

Therefore, new laws will not make people change their habits for the better, but will instead make people adopt their behaviour to account for the law, hence creating some other unintended consequence most of the time.

A law meant to make oil cheaper for Kenyans made it more expensive  

Take, for example, the laws that regulate the price of oil - petrol and diesel - in Kenya. A few years ago, at some point, politicians felt that the price of oil in Kenya was too high on fumes, and that the citizen was being "exploited" by oil companies.

The politicians even went ahead and decided that it was not only the oil companies that were fleecing Kenyans, but many other manufacturers were also selling their items at too high a price for the "mwananchi". The mananchi, for strange reasons, is always stuck in poverty and appears to struggle to afford most needs.

For some reason, it did not hit the politician's minds that all these prices they were complaining about, all existed in a free market. Sellers were free to set their own prices and buyers were free to buy at prices they felt deserving.

If prices were high across the board, and people were still buying, then probably it had nothing to do with the sellers.

But then, there's what I call the carpenter's problem. A carpenter will tend to assume that most problems, including those not involving pieces of timber, can be solved by hammering at them. We all do it, starting from when we are children and all problems are solved by a well of tears.

Equivalently, a Member of Parliament makes laws, and tends to think that all problems can somehow be solved by making laws that address the problem.

So Kenya's parliament tried to address the problem of high prices by threatening to make laws that would set low prices, for the mwananchi.

This leads us to problem #2. Kenyans do not read, or research their problems. Going to school to get a certificate that makes us more competitive in jobs, is often mistaken for reading and knowledge.

It thus escaped these MPs that price control laws have a long history of never working, be it in Russia, or the United States of America.

The MPs thus passed a law that regulated the price of oil, and appeared to work for the Mwananchi just after it was passed. However, the price did not reduce as much, and remained around KSh. 110, which was where the global prices were.

Fast forward to 2014 where global prices, almost halved, dropping by about 40 percent. Back in Kenya, prices have remained above KSh. 100, with excuses being given as to why Kenyans are not enjoying oil at between KSh. 60 to a maximum KSh. 90. One hilarious excuse was that oil Kenyan imports is a special kind of oil.


As the overzealous MPs had been warned before, price regulation does not work. Their intent to control oil prices now mean that Kenyans pay some of the highest prices for oil in the world. A catastrophic failure for using the wrong tool for the wrong job.

It would have been better to increase competition by encouraging new oil market players, rather than by controlling prices.

The Government's of Kenya ill fated attempt to drink from the Keg

In the US, tax has remained at the same level compared
to the size of the economy, even as the government played
around with income taxes. The best way to raise taxes
is thus to grow the economy as shown here.

Culprit number 2 is the Government of Kenya (GoK), same culprit as above, but a different arm of it.

Always after higher taxes, GoK decided that alcohol is a good target, since people will always drink, and alcohol is seen as a societal evil, which needs to be punished kidogo.

GoK thus decided to tax keg, a popular alcohol packed in large "kegs", dispensed into jugs, and that retailed at between KSh. 25 to Ksh. 30.

By increasing tax on the popular drink, GoK would quickly raise, even double or triple taxes collected from these evil drinkers, which would go to development.

Genius move, right?

Wrong. With Keg prices up to KSh. 60, the target market could no longer afford the drink. They instead went back to drinking illicit changaa ,for which taxes are not paid, and which sometimes leads to death due to use of wrong ingredients.

Many of these legal Keg joints had to shut down as GoK's
attempt to increase taxes failed.
20,000 farmers also saw their livelihood go up in taxes
The market for Keg disappeared overnight, and the manufacturer ceased producing the drink due to low demand.

The result? Instead of doubling taxes collected, GoK collected nothing, and the few taxes which were being collected from the brewer, were lost. Jobs contributing to the economy were also lost.

20,000 sorghum farmers were left looking for an alternate source of income. 

Yet another, catastrophic move from the Government of Kenya.

What is even more of a catastrophe, is not my overuse of catastrophe, but that Kenyans still anticipate new laws will solve their problems, and demand a law for every problem.


Comments

Popular posts from this blog

A Kenyan in Addis Ababa (Part 2) - The "University Girls"

This post continues from Part 1. 

The residents of Addis are friendly too. On my first day, I did meet a guard at a hotel, who later offered to show me around. Among the places he suggested, was this place where some “University girls” were holding some "dancing ceremony". He added, that Ethiopians being Orthodox Christians, were about to go on a sex, alcohol and meat fast, hence the importance of this “ceremony.”
I had some suspicion that I was being sold to sex, but my guide insisted that this was not a sex sale. Just dancing University girls. We did end up in some nondescript compound, and into a house. There was sort of a sitting area, with a radio system, low benches and tables, and grass sprinkled around the floor. Grass sprinkled around the floor is an Ethiopian tradition that indicates you are welcome to a place.

It was about 5 PM,  and the hosts seemed not to be expecting any visitors at this time. My guide disappeared down some corridor into the back to call them. In…

Beers in Kenya: A sober opinion

I have had a short beer swigging stint in my life. It has however been long enough for me to share my opinions of Kenyan beer. Interestingly, over the course of sharing such opinions with other drunkards connoisseurs,  I have found that we all have different views as to what beer is the best, which one makes you too drunk, or which one gives a free,  extra hangover for every hangover you get from it.
For starters, like everyone else, I discovered that beer isn’t as sweet as it looks like in those adverts that show golden barley swaying in breezes,  happy men smiling and toasting chilled, foaming glasses of beer as a deep voice does some narration in the background.
Beer is bitter! Now, it turns out beer is intentionally made bitter. See,  beer shares the same ingredients as bread. The major difference is that bread isn't fermented. Bread is sweet, so why isn't beer sweet?

Why Kenyans love Kigali (Part 2)

See part 1 of why Kenyans Love Kigali, which this articl is a continuation.

In my previous post on why Kenyans love Kigali, or Rwanda for that matter, I had mentioned on the security of the city. The post however widely dealt with the feel and appearance of the city, and a little bit of the country.

Both of my visits to Kigali have been through the airport, though you may opt for a more adventurous journey by road. Getting to Kigali then required a Kenyan passport, but no visa. Now, all you need to go through both Uganda and Rwandan borders are a National Identity Card.

For travel by air, Rwandair is a cheaper option for Kenyans as compared to our national flag carrier, Kenya Airways. Ironically, most other Africans get to Kigali via Kenya Airways, thought most Kenyans will opt for the cheaper Rwandair. The flights are comfortable and the service on board the 1 hour 15 minutes flight is great.

Depending on the weather, your landing can be quite full of turbulence in Kigali. The airpor…

Kenya Power customers suffer from Ksh 0.5 billion faulty prepaid meters

Kenya Power is a famous company in Kenya, one which draws what my colleagues in media will call "mixed reactions". While those in urban areas such as Nairobi regard Kenya Power as a very unreliable firm, I have heard of villages in rural areas where blackouts go unreported for even 3 days . To the rural people, recent electrification means that at least they get to get electricity for some days, which is better than no electricity.

In urban areas, the story is not any different. Around Imara Daima along Mombasa Road, power is mostly reliable, with blackouts been few in a week, and even at times been less than 10 in a month. In other places in the city, blackouts are a daily occurrence, and in some places, the blackouts are more than meals, counting two teas , breakfast, lunch and dinner.

Another aspect about Kenya Power is the prepaid meters, which like the firm, are equally loved and hated.

Ever since I became proud enough to start paying my own bills, I have used the Keny…

The Idle Life of a Regular Kenyatta University Student.

My education life was quite an active one, till I completed the 8.4. part of 8.4.4. I went to good primary schools, with tuition in class 6-8 and boarding in class 7 & 8. My life in primary was quite full, esp with tuition in class 7 & 8.I passed KCPE and was admitted to a good National School in Nairobi. My High School life was divided into 3 months holiday and 9 months schooling per year, except for 4th form where i spend I had a 1 month holiday between January and November. I was therefore well occupied for the first 12 years of my education.

After sitting for my Kenya Certificate of Secondary Education(KCSE) in November 2004, I had to wait for results till March 2005. I was well above the B+ university cut off. Previously in early 2004, we had chosen universities and courses we would like to attend by filling the Joint Admissions Board forms. After the results were out in early 2005, we had to wait till August 2005 for the 2004 KCSE lot to change their university and cours…