Opinion: Be careful with politicians who promise to lower prices of goods and services

Filed under: Politics,Special Comments |
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By Henry Kyambalesa

I have noticed that some politicians have continued to promise voters that they will reduce the prices of “fuel, food, mealie meal, and electricity” within a short period of time if they secure the people’s mandate to form government on January 20, 2015.

I wonder if they would do so by “presidential decree”!

They probably wish to revert to the regime of price controls that was characteristic of the UNIP era!

Needless to say, these kinds of pledges can, very unfortunately, fetch a lot of support among voters for whoever is peddling them!

But while “price controls” can provide relief to consumers in the short-term, they can culminate in serious socioeconomic ills in the medium-term and the long-term. By and large, the alterna­tive arrangements which suppliers may resort to in an effort to maximize income, or minimize costs, under a re­gime of price controls tends to have adverse effects on economic welfare; exam­ples of such arrangements include the following:

(a) Discon­tinuing the production or sale of affected commodi­ties;

(b) Restricting or reduc­ing the quantity and quality of affected commodi­ties;

(c) Dispensing with marginal customers;

(d) Restricting or abandoning attendant market­ing services, such as delivery service, and after-sales ser­vices;

(e) Impos­ing condition­al sales, such as tying contracts;

(f) Under-th­e-counter sales manifest­ed by sales to favored custom­ers, black market operatio­ns, or speculation in the con­trolled commodi­ty;

(g) Engaging in speculation in the controlled commodity; and/or

(h) Smuggling of affected commodities to countries where prices are higher than controlled prices obtaining in the domestic market.

In all, I agree with Murray Sanderson when, in 1989, he argued as follows:

“Price con­trols have the effect of discourag­ing supply while en­couraging demand. The inevita­ble result is scarcity of commodi­ties; and when there is scarcity, you always get people who buy up commodities wherever they can and resell them on the black mar­ket. In Zambia, we call them ‘black marke­teers’. It is a useful term, for it puts the blame upon them rather than the authori­ties.”

Agricultural Output and Food Security:

According to the reso­lutions of the World Food Summit held in Italy in Novem­ber 1996, food security “exists when all people, at all times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life.”

To attain greater food security, a government needs to take the following measures:

(a) Address the following factors identified by the COMESA Secretary General in 1996 as having contributed to the low levels of agri­cultur­al production in Zambia: non-availability of financial capital, and the high cost of agricultural credit; inadequate trans­port and storage infrastruc­ture, and the high cost of transport; the under-provision and high cost of agri­cultural inputs; an inefficient agricultural marketing system; inade­quate skills in agricul­tural production and marketing; inconsistent and unrealis­tic agricultur­al policies; and inade­quate investment in agricultur­al develop­ment by the national government.

(b) Revive and revitalize the Zambia National Service (ZNS) production camps, which should accept enroll­ment by Zambian citizens on a volu­ntary basis, as well as promo­te and bolster agri­cultural pro­duction in the camps thro­ugh greater fina­ncial support and generous condi­tions of service for ZNS person­nel.

(c) Utilize the vacated refugee camps dotted across Zambia for agriculture-related training, crop production, and other vocations to be facilitated by a cadre of skilled and professional trainers.

(d) Require all provinces to create revenue-generating Provincial Agricultural Estates, and to use a portion of the output of the schemes to maintain their own local food reserves, and also require all district councils, educational and training institu­tions, police camps, military barracks, garrisons, and prisons to initiate and maintain agricultural production units.

(e) Encourage resettlement schemes to produce more food by providing for irrigation dams and canals at all such schemes, and provide for attractive agri­cultural incen­tives to boost both small-scale and and large-scale farm­ers

(f) Promote effi­ciency in process­ing, sourc­ing, and distribution of agricultural inputs by provi­ding for informal trade in agricultural inputs among farmers.

(g) Promote effi­ciency in process­ing, sourc­ing, and distribution of agricultural inputs by provi­ding for informal trade in agricultural inputs among farmers, and the crea­tion of a “Far­mers’ Hold­ing Company” by farmers (through a low-interest loan, if need­ed), to supply low-cost inputs nationwide at zero value-added tax—inc­luding seeds, seed­lings, ferti­lize­rs, pesti­cides, insecticides, stock feeds, and grain bags.

The cooperating farm­ers would need to as­sume ownership of the com­pany as founding sharehold­ers, and the com­pany could prefera­bly be registered and operat­ed as a corporate entity.

(h) Create and maint­ain irri­gation schemes at taxpayer expense, including the damming of rivers and const­ruction of irri­gation can­als nationwide. In this regard, we should promote all-season crop production—January through Decem­ber. And we should appreciate the pledge made by donor countries to bolster the viability of the envisaged National Irrigation Plan (NIP).

(i) Create feeder roads and maintain old ones nationwide, im­prove training conducted in agri­cultural re­search centers, provide for low-interest loans for erecting secure storage facilities, and extend incen­tives to agri­busi­nesses and canners and proce­ssors of agricultural pro­duce.

(j) Create—in collaboration with the Zambia National Farmers Union (ZNFU), the Millers Association of Zambia (MAZ), the Zambia Cooperative Federation (ZCF), and other relevant stakeholders—a marketing system for all kinds of agri­cultural produce designed to provide for the following: direct sourcing of such produce from farmers by mill­ers, re­tailers and other industrial buyers; and procure­ment of unsold produce by the Food Re­serve Agency at wholesale prices for preser­vation and/or distri­bu­tion to government institutions like boarding schools, colleges and hos­pitals. And

(k) Ensure that the various kinds of imports that are currently exempted from customs duty should continue to enjoy the duty-free status—including fertilizer, irrigation equipment, irrigation pumps, tractors, machinery for soil preparation and cultivation, harvesting and threshing machinery, poultry machinery, fungicides, and herbicides;

Besides, there is a need to support all kinds of agricultural pursuits and en­deavors, including poultry, dairy farming, cattle ranching, fish-farming, horticul­ture, and crop husband­ry.

These efforts can make it possible for us to attain lower prices of food and greater food security rather than have politicians dictate the prices of mealie meal and other kinds of foodstuff.

The Cost of Water and Electricity:

The government needs to take the following measures in order to facilitate the lowering of electricity tariffs and water charges:

(a) Work with executives of sewerage companies and suppliers of water to devise a standard and lean organization structure to be adopted by the companies;

(b) Provide for a forum at which suppliers of water and electricity can be afforded the opportunity to suggest viable ways and means by which the government could facilitate the process of making public utilities less costly to consumers; and

(c) Require all suppliers of water and electricity to find ways and means of reducing marketing, public relations and administrative costs, and to seek low-cost suppliers of machinery, equipment, office fixtures and supplies, sub-contracted services, and so forth.

These efforts can result in lower electricity tariffs and water charges, rather than dictate to such suppliers what to charge their clients.

In this regard, there is also a need for the government to seriously consider potential alternatives to electricity, such as by providing att­ractive ince­ntives to the private sector to engage in the explora­tion and/or supply of other forms of renewable and environmen­tal­ly friendly sources of ener­gy—inc­luding natural gas, solar energy, wind-gene­rated electricity, ethanol, metha­nol, and propane.

The government can also consider the prospect of investing in research rela­ting to low-cost and environmentally friendly sources of energy, and in energy conservation. To be consid­ered in this endeavor could be research projects concerning the use of natural gas, electric power, ethanol, methanol, and propane as alternatives to gasoline in order to reduce air pollution, and to lessen Zambia’s depen­dence on costly imported oil.

These additional efforts can make it possible for us to attain lower energy costs and tariffs. Dictating the charges on the use of energy by the government is not the right way for our beloved country.

Innovations in oil refining and marketing can provide an additional means by which the government can facilitate the charging of lower electricity tariffs.

In this regard, we need to seriously consider the findings of a study commissioned by the Chiluba administration (completed in December 1999) in order to streamline the importation, refining, and nationwide distribution of petroleum products.

We need to determine how the infrastructure and institutional framework of the oil industry—consisting of the TAZAMA pipeline, Zambia National Oil Company (ZNOC), Indeni Petroleum Refinery, and private oil distributors like Agip, BP, Caltex, Engen, Exxon Mobil, Jovenna, Pegausus, and Total—can efficiently and effectively serve Zambia’s long-term oil needs.

Also, we need to initiate studies designed to enhance the management of strategic oil reserves.

With these kinds of measures and initiatives, consumers can ultimately be afforded the least possible prices rather than through government dictating the prices of petroleum products like gas oil (or diesel), premium gasoline (or petrol), jet fuel, liquefied petroleum gas, industrial and domestic kerosene, light and heavy fuel gas, bitumen, and related products.

With respect to the price levels of consumer goods and services in the economy, we need a highly effective Zambia Competition Commission to foster competition in commerce and industry that could ultimately lead to the creation of a robust and competitive business system.

The desirability for such a system, I believe, revolves around its ability to generate a cornucopia of goods and services, improve the quality of product offerings, and charge competitively lower prices.

In conclusion, politicians who are promising to reduce the prices of “fuel, food, mealie meal, and electricity” within a short period of time without explaining how they will deliver on their promises should not deserve our votes.

Peace Be Upon Us!

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2 Responses to Opinion: Be careful with politicians who promise to lower prices of goods and services

  1. Mr. Kyambalesa you seem not to be in touch with Zambian reality. When were you last in Zambia? Avoid Pf from using you. They have killed your province @ North Western. Don’t write such articles without knowledge of what is there on the ground.

    Jameson Kyeya
    January 10, 2015 at 4:54 pm
    Reply

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