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September 25, 2018

Deal With Cartels To Avoid Wage Rise Demands

KNUT National Treasurer Albanus Mutisyia, Chairman Mudzo Nzili and Secretary general Wilson Sosion at the KNUT headquarters offices. Photo/FILE
KNUT National Treasurer Albanus Mutisyia, Chairman Mudzo Nzili and Secretary general Wilson Sosion at the KNUT headquarters offices. Photo/FILE

The government has been directed by the Supreme Court to pay teachers the equivalent of a 50 per cent pay rise.

Kamau Thugge, the National Treasury permanent secretary, says budget cuts are needed if the Sh17 billion needed to pay teachers is to be found.

Currently, the budget has allocated Sh181 billion for teacher’s salaries taking up 38 per cent of the public wage bill.

There may be no option but to make budget reallocations to meet the order even though suggestions have been made that taxes could be raised.

This should not be the case.

We cannot raise taxes to pay salaries as this is tantamount to cutting the income of others.

It is also not sustainable since teachers are just the first group to win big.

Next you will see doctors, nurses, lecturers, magistrates, police and many others demanding ‘fair wages’.

Clearly, you cannot keep raising taxes or cutting budgets every time you need to meet these demands.

What government should do is to remind itself what some of its key responsibilities are, chief among them affordable living for its citizens.

No one understands this better than the Indian government.

In India, elections are won or lost on the price of onions and by extension the level of inflation in the economy.

The Indian government thereby ensures basics like food are extremely cheap lest it faces uprising.

Here, the government seems to have abandoned this mandate.

Kenyans are among the most exploited populations when it comes to price of goods.

So much so, that teachers will still take to the streets after they are paid demanding even more for the simple reason that they cannot still make ends meet.

A better approach to solving these wage issues is to bring down the cost of living so that less of people’s income is spent on basics and they have something little left over.

Instead, government has allowed this economy to become captive to cartels who are pricing people out of this market.

Recently, we have seen sugar ignite passionate debate in this country. The farmers we claim to protect get Sh3 per kilo of sugar sold on our shelves yet the consumer buys it at Sh120 per kilo.

Where is the Sh117 going to?

This is brokerage of the highest order and a clear example of how cartels have wormed themselves into the supply chain of consumer goods to reap immoral profits at the expense of producers and consumers.

The global price of crude oil fell below $38 last week. This from highs of $100 that we have seen in the past year.

This is more than a 60 per cent plunge.

Yet the price of Super petrol in that period has merely declined from Sh114 per litre to the current Sh102 per litre in Nairobi.

That is a mere 10 per cent price cut at the pump.

Even if you allow for the depreciation of the shilling which has slid 11 per cent against the dollar this year, it doesn’t make up for the huge discrepancy in the price trend between global prices and Kenyan prices.

It makes even less sense that diesel prices went down this month while that of Super went up by Sh4.70.

This betrays a political awareness on the likely repercussion of raising diesel prices arbitrarily from the public sector and the wananchi who would see fare hikes.

Meaning, the ERC has room to play.

Across the board, you find many items in Kenya are overpriced.

For government, it is time to think about tackling these cartels.

Why for example are electricity prices up yet they are supposed to be down to their lowest level following the injection of 280Mw of cheap geothermal power?

Because there are investors in diesel thermal power plants which produce expensive electricity and they need to stay in business.

This cartel like behaviour is costing Kenyans millions monthly.

Go to schools where students are required to buy many expensive course books and they must be from certain publishers.

Poor parents are a captive market for such cartels who set their own prices and makes huge profits because government has not dealt with them.

The government must go back to basics and deal with the supply issue.

It must ensure its population has cheap food by encouraging production and eliminating unnecessary brokers.

It must fast track its irrigation measures to bring cheap food to the market and also incentivise those with large tracts of land to put them under farming.

The Competition Authority of Kenya must begin to show itself.

In other countries big banks, airlines etc are routinely slapped with heavy fines for price collusion and setting.

This is what the CAK must do. Carry out market supply chain studies to determine what should be the fair pricing of goods in a given sector and then go after those who collude to make them more expensive for consumers.

At the end of the day, the government will need to make our salaries do more for us otherwise it will keep facing wage rise demands.

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