Govt should not dictate prices

Recently, government agencies have tried to regulate prices of goods and services from the private sector.

We have seen, for instance, Parliament’s Committee on Industry, Trade and Tourism taking Illovo Sugar (Malawi)  to task on the issue of sugar prices.

More recently, the Malawi Communications Regulatory Authority obtained an injunction against MultiChoice Malawi’s intended increase in television subscription charges.

Of course, whether the contested sugar prices and digital satellite television subscription fees are ridiculous or not are topics of good debate.

However, this behaviour of trying to dictate pricing for private companies is starting to look like some silent populist policy that totally disregards the dynamics that guide pricing of goods and services.

Besides demand and supply, other main factors that influence pricing of products are production costs and operating expenses plus competition.

For starters, let us look at production costs and operating expenses in our economy at the moment.

It is common knowledge that since the 25 percent devaluation of the kwacha in May 2022 and the subsequent subtle devaluations, almost all businesses are witnessing ever-increasing production costs and operating expenses.

Now, in the middle of the ever-increasing operating costs, why does the government expect businesses to offer lower prices for their products?

We simply need to remind ourselves that businesses are established to make profits and that they would adjust their prices with any increase in operating costs.

Secondly, let us look at the issue of competition in the industries that Illovo Sugar and MultiChoice Malawi operate in.

By definition, competition means two or more suppliers of the same stature, offering the same product to the same customers in an industry.

The big question is: Is there any meaningful competition for these two companies in their industries?

No, there isn’t. They are more of monopolies.

However, the way our governments operate, one can safely conclude that we have been complicit in creating and nurturing these monopolies by adopting policies that have made it harder for new entrants to get into most industries, and consequently stifling competition.

Common sense has it that having more suppliers of equal stature in an industry brings about meaningful competition and incentives for each supplier to reduce their prices to attract more customers.

At this point, one would ask: Why don’t we put in place policies that encourage competition, instead of trying to dictate pricing for the private sector?

Additionally, it becomes scary when one realises that the tendency of dictating pricing for the private sector has potentially adverse and far-reaching consequences for Malawi as a nation.

For instance, this may create a hostile business environment to potential investors.

Authorities should spare a thought about potential job losses for Malawians in the event that a company abandons Malawi.

Are we having our priorities right by fighting for luxuries like digital satellite television? Why not spare the energy for basic needs?

Remember that Malawi is a liberalised economy, one in which economic factors like demand and supply, production costs, operating expenses and competition determine the pricing of goods and services.

We also ought to be mindful of the fact that the regulation of prices by government agencies does not paint a good picture of us as a nation.

Government should strive to put in place policies to address the underlying economic challenges and produce win-win situations for both businesses and consumers.

Authorities should strengthen its systems instead of going for quick-fixes like parliamentary committee hearings and court injunctions that are paid for by the struggling taxpayer.

These apparent exorbitant prices are only a reflection of the depressing state of our economy.