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

Nairobi's Top 4 Texas Brisket Places Reviewed and Ranked

Brisket on a bed of roast vegetables with barbecue sauce at Texas Brisket, Kikuyu  This review has been updated after a number of you suggested I try the brisket at County2County.  What's the best place to have Brisket in Nairobi? What's even brisket?  Brisket is one of the toughest cuts in a cow, from around the belly. It is so tough that it has to be smoked for about 16 hours to tenderise. But that there, is the catch.  16 hours later, it is the most flavourful and softest cut you will ever have. So full of flavour and so soft you can pick it apart with your fingers.  However, due to the long cooking time involved, only a few places offer brisket in Nairobi.  The best so far is Texas Brisket which is located within Kikuyu Railway station.  They do the meat for a proper 16 hours, and will usually have a fatty or non-fatty portion. The fatty portions are more tasty. A 500 gram serving goes for KSh. 900 and a 1 KG order comes with a serving of free fries. Their brisket has a wel

Beers in Kenya: A sober opinion

Note: This is a dated post and has since been mostly passed by events. SAB Miller beers including Castle and Peroni are no longer widely available in Kenya after their exist. Sirville Brewery was bought out by Brew Bistro before being permanently shut in a tax dispute. Kenya is a land of milk, honey, beaches and taxes. I have penned, or is typed, a newer post here .  Peroni - One of the best beers in Kenya. Did a taste of canned and bottled Italian, and bottled Tanzanian I like the tangy flavour and body in Tanzanian Peroni. The can is close. Heineken drinkers will like the Italian one.  I have had a short beer swigging stint in my life. It has however been long enough for me to share my opinion 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 one free, extra hangover for every hangover you get

The bitter story of the downfall of Mumias Sugar company

A spoonful of sugar, but for who? ( Image: Carol Wallis on Flickr ) Have you heard the bitter story of Mumias Sugar? Regarded by many as Kenya's most successful sugar miller, Mumias Sugar Company was a disaster waiting to happen. Many pointed out how Mumias Sugar Company was a fortress in the wreck that is Kenya's sugar industry, only unaware that it was just a matter of time. As the old wise men said, "Ukiona cha mwenzako cha nyolewa, tia chako maji". The proverb means that if you see your neighbour's head getting shaved, your head will soon be undergoing the same - you'd therefore better wet your head for a smoother shave, otherwise you will be forced to undergo a painful, dry, shave. But what ails Kenya's sugar industry? The Kenya sugar industry is under legal siege. The typical Kenyan issue of coming up with laws to tackle a problem is evident here. Many of Kenya's sugar factories are owned by the government, and have slowly decline

Heineken 0.0 Best Alcohol Free Beer

What if you wanted to drink a beer, but without getting drunk? Say, you don’t drink alcohol, or for one reason or another, you are off alcohol. Or perhaps it’s a working day, and you would like to have a cold one in the middle of the day but without all negative effects. Well, you could. Welcome to the world of Alcohol-free beer.  Over the last few days, I’ve been enjoying some Heineken 0.0 rather than the typical beers. Now, Heineken 0.0 is a beer, in the malt lager style as the standard Heineken, the only difference being that all the alcohol has been removed - it contains less than 0.03% alcohol, which counts as safe enough even for those who are pregnant or affected by alcohol, according to Heineken. It smells very close to a Heineken, tastes close to a Heineken, and you even keep taking a piss like you would when drinking a Heineken - but you never get drunk.  How do they remove all the alcohol? From my research, they brew a standard Heineken beer as normal, then use some form

Counterfeit alcohol hits Nairobi

Counterfeit The Famous Grouse    bought at a shop along Nairobi's Dubois road, note the packaging. Dishonest dealers in Kenya are now repackaging various alcohols and selling them off to unsuspecting buyers. The scam appears to target a broad range of popular spirits, including Smirnoff Vodka and The Famous Grouse Whiskey. Various residents have reported that the drinks are sold in shops in down-town Nairobi and cheap clubs. Popular drinks are either substituted with similar looking forms of alcohol or blended with them. Vodka is substituted with chang'aa , a local moonshine drink while brandies are used to dilute, or wholly sold off as more expensive whiskies. There is suspicion that some of the alcohol used in this drinks is diluted industrial alcohol. Industrial alcohol is normally cleared, with tricks such as food colouring and perfume deployed to have the counterfeit alcohol look like the genuine one. The syndicate appears to be recycling bottles which are colle