COMESA reports show that Kenyan cooking oil prices were overcharged by 21%, costing consumers Sh67.7 billion from July 2021 to December 2022. The price should have been Sh274 per litre, but consumers paid Sh333, largely affected by market oligopoly and price hikes not corresponding with input costs. Enhanced regulatory oversight is necessary for affordability.
A recent report from the Common Market for Eastern and Southern Africa (COMESA) highlights that cooking oil companies in Kenya have overcharged consumers by 21% from July 2021 to December 2022. The COMESA Competition Commission (CCC) asserts that the fair price should have been approximately Sh274 per litre, yet consumers were instead faced with a price of Sh333. This discrepancy resulted in excess charges totaling Sh67.7 billion. The commission noted that the price hikes enacted by manufacturers exceeded the actual increase in crude palm oil costs. Moreover, despite a decline in crude palm oil prices from early 2022, consumer prices for cooking oil remained disproportionately high through early 2023, showcasing a significant gap between production costs and retail pricing.
The report suggests that the structure of the market allows for such overpricing practices to persist. Kenya’s vegetable oil sector is characterized as an oligopoly, where a few companies dominate the supply chain from procurement of raw materials to distribution. This level of vertical integration, along with limited competition, permits these companies to set prices that favor their financial interests over fair market practices. Historical pricing data further illustrates that prior to 2021, prices for cooking oil in Kenya, Zambia, and South Africa remained relatively stable, averaging around USD1.6 (Sh207) per litre before soaring to Sh333.
The significant increase in cooking oil prices has adversely impacted Kenyan households, particularly those from vulnerable socioeconomic backgrounds. The excessive charges represent not only a burden on household budgets but also a loss of extensive financial resources that could have been invested in vital areas such as job creation, higher education, or healthcare. In light of these findings, the CCC has stressed the urgent need for greater regulatory oversight in the market of essential commodities to ensure the affordability and availability of cooking oil, critical for maintaining public welfare, especially as it is a dietary staple.
The report from COMESA reveals deep-rooted issues within the cooking oil market in Kenya, where companies have exploited market dynamics to impose significant overcharges. Given the essential nature of cooking oil in diets, this report sheds light on the broader implications of pricing strategies employed by a limited number of firms. It highlights the economic consequences of a lack of competition and the need for stronger regulatory measures to protect consumers from unjust pricing practices.
In conclusion, the COMESA report unveils significant overpricing in the Kenyan cooking oil market, with companies overcharging consumers by 21%, leading to substantial financial loss for households and national development. The oligopolistic nature of the market, coupled with a lack of competition, has facilitated these practices. There is a pressing need for better regulatory frameworks to ensure the affordability and accessibility of essential commodities like cooking oil, critical for public health and welfare.
Original Source: www.mwakilishi.com
