News Column

Tackle sugar cartels

January 20, 2014

The Kenya Sugar Board is blaming distributors for high prices of the commodity and is proposing to remove them from the value chain. This would mean that retailers get the commodity directly from millers, who would be forced to have warehouses across the country. Theoretically, this may not reduce prices given that the value added in transporting the sugar to the godowns and then to the consumer still has to be added to the overall price. The only reason prices would come down is if the distributors have been charging more than they should for taking the product closer to the end user. That would suggest a deep-seated problem of distributors having inordinate say in the value chain. This kind of market power arises from one of several factors, the most likely being the ability to fix prices as a cartel. To break the cartel, the regulator needs to look at the way distributors are appointed. At the moment, each miller picks its own distributors through competitive, but not exactly transparent methods. The board may need to have a registered list of distributors who it can bind to a code of ethics. Millers would pick from this lot and the market informed of fair prices through regular guidelines. This would do more to check against their excesses than a trade ban, which has no place in a liberalised market.


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Source: Business Daily (Kenya)


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