Why does the government control sugar prices?
I was reading this story in the Nation on the president’s declaration to increase sugar prices by Ksh 300 per tonne. (O’Kubusu: How $$weet do you like your $ugar?).
I understand the political objective (Kibaki is pandering to votes from western province just in time for the election). What I can’t figure out is why the government is setting price controls on sugar.
Sugar is a commodity that is traded on the world markets. So, why not let the sugar farmers in Kenya compete with the sugar farmers in Cuba and Brazil? (let them sell it on the world market like any other agricultural commodity; e.g. coffee and tea)
And that brings me to another question:
Why not let farmers trade their commodities on the NSE; the same way companies trade stocks? Brazil, which is the largest producer of sugar in the world, does allow individuals to buy and sell Brazilian sugar on their stock exchange. (Samba Capitalism).
Kenya’s economy is heavily dependent on agriculture so why limit that potential to barter type buying and selling that’s heavily laden with inefficient government price controls?
The Nation reports that the economy grew by 8% (it’s all over for Raila; “MOWho?)
Kenya I think grows enough tea to sustain all those tea drinking folks. There never seem to be enough of it though. The idea of opening a free trade sounds good but without Govt. regulation, this is what happens.
1) Sugar growers are organised in co-operatives which are poorly run. When the co-op boards take the money for their use, farmers get pissed of and set the whole sugarcane planatations on fire. Anyone who’s ever picked a sugar cane will know those dry leaves can light up in a minute.
2) When the Govt is about to submit a budget in June, there always seems to be a sugar shortage. Why? Sugar was one item which the Govt knows is in huge demand like Beer and adding more taxes on it is a good way to generate much needed funds. Back in the day when we operated Kinoo General store, we would buy alot and hold, just like Texas hold them poker and after the budget the new price takes effect and bang, a good gain.
3) Sugar is also used as a political tool quite some. Politicians know the language the common man speaks, cup of tea, anyone who can speak that language can get in the hearts of voters. Just buy a bag and distribute in the rural area to those old ladies, they will sing your name for life.
I therefore think, the instability in supply can inflate prices and keep the local guy from affording the commodity. Then you will have another problem of angry people who think the wealthy are exploiting the poor. My 2 cents anyways
Good news: The sale of Miwani to Mumias (only 1 of 2 private millers) is a step in the right direction. The GOK has too many fingers in the pie but Nzoia needs to be privatised as well.
West Kenya is the other private sugar miller & they can’t source enough sugarcane for their factory.
The farmers have problems, many of their own making. They have 5 kids, subdivide the land over & over again. This leads to uneconomical land acreages for farming,
The roads are very poor & not enough of the cess collected goes to repair these roads thus transport costs rise.
BTW, sugar is a heavily subsidized commodity in many countries. The USA & Europe are prime culprits. They subsidise their farmer who export “cheap” sugar to Africa!
KE, Cold Tusker, Kinoo, Maina, Sijui, Bankelele, …et al,
Hope you’re all doing well.
I’m really sick of this 8am-5pm rat race so its time to make the big bucks.
I’m getting ready to form a forum on yahoo/gmail where we can share business ideas as well as contacts/network.
I have a couple of business ideas i want to throw out and ask for ur opinion.
I will then send out invitations coz this will be an invitation-only forum. I will invite some of my “like-minded” friends as well and you are welcome to do the same.
Deal or No Deal ?
ME:
I’m always open to any idea’s that involve money making. So, drop me an email at: kenyanentrepreneur@gmail.com.
Also, posting your business idea’s on this blog might be a good way to get varied opinions on whether or not they might be viable (don’t worry about people “stealing” your ideas – it rarely happens and if it does, it’s because you were too late with the execution!)
Too late with execution ??? My theory is “There’s nothing new under the sun”.
Since this is an invitation-only forum one of the rqts for membership will be full disclosure. We will have to know your Real Name, Work and Educational Background etc
If you’re not game then…we may exclude you.
CT is also “very private” so we may out him too.
I’ve no time to flash my business ideas at blogs….i maybe Kenyan but i’m extremely paranoid.
Intel’s Andy Grove says…”Only The Paranoid Survive!!!”