Saturday, January 5, 2008

Tanzania Consumers are suffering from Uncontrolled, Unreported Inflation and Cartels.

By Bernard Kihiyo

Consumer is an individual like me and you, who tend to buy goods or services for his/her personal uses to satisfy individual immediate needs, gains, leisure, interests or satisfaction. Consumer can consume tangible goods like food, building materials, home appliances and intangible goods like hospital, transport, insurance, banking, utility, telecommunication, education services this is just to mention some few.

According to my definition above, it appears that consumers are the largest economic group, affecting and affected by almost every public and private economic venture and decision.

Inflation can be defined as the continuing rise in the general level of prices of some set of goods and services in a given economy over a period of time.

There two main causes of inflation; one is the presence of excess demand beyond the output capacity of the economy to supply goods and services, which push up prices, i.e. financing of the public deficit entirely by printing more money, this increase in money supply will push aggregate demand up, causing prices to rise (demand –pull-inflation).

And the second cause of inflation is an increase in inputs costs- wages, raw materials, rise in taxation, the increase in the prices of utilities, other overhead costs, rise on costs of imports, rise in bank interest rates; all these tend to push up cost faced by the firms, thus forcing a consumer price to increase (cost-push inflation).

While; Cartel is a small group of producers or importers of goods or service who agree to regulate supply in an effort to control or manipulate prices. Adam Smith wrote in ‘’The Wealth of Nations’’ (1776) that when people of the same trade meet, `the conversation ends in conspiracy against the public, or in some contrivance to raise prices or price fixing.

Tanzania economy depends fully on imported goods because our industrialization process is on an very infant stage; we do import almost 75% of goods in our shops from canned/packed food stuff to building materials, from home appliances to cloths, from medical equipment to drugs, from computers to office stationary this is just to mention some few.

Due to this economic dependency from other countries’ economies; Tanzania tends to be a victim of local and overseas cartels in human and animal drugs, petrol, cars and automobile parts, building materials, home and industrial appliances and the like.

We know by names few prominent traders who feed and supply all above mention stuff for Tanzanians. With just a single meeting at Kariakoo or Jamatin prices of certain goods might rise to a significant percentage on imported goods.

It is the interest of all businessmen around the world if not controlled; to reap as huge profit as possible no matter what it takes to consumers. This kind of conspiracy led to unjustifiable and artificial increases in prices for hundreds of imported food stuff, medicine, building materials, home appliances to Tanzania.

It is cartel-type of purchasing behaviour of big merchants in Tanzania who use to form cartels which decided the purchase price of farmers’ food and cash crops. They normally decide who will buy what, where, at what price and so on.

It is cartel-type of purchasing behaviour of big merchants who use to adopt a delay tactic on purchasing on farmers’ cash crops such as cotton, coffee, tobacco, tea, and cashew nuts with the intention of frustrating farmers whom later can accept low prices for their crops

The government on some few incidents had intervened on abolishing licences of some traders whom appeared to sabotage or having intentions of exploiting farmers in one way or the other, however majority of them go without been identified.

It is against this background that Tanzania Consumer Advocacy Society (TCAS) would like to work as an independent watch dog on identifying and investigating these antitrust behaviours on purchasing farmers’ food and cash crops which ruin the purchasing power - marginal propensity to consume of this very important section of Tanzania consumers.

TCAS will do all what it takes to investigate and conduct some researches on all antitrust behaviours that in one way or the other affects consumers’ welfare.

As of April 2007 TCAS had conducted a consumers’ survey on their experience for the past twelve months; it had been learnt that there is a significant price rise of common food stuff like maize meal, rice sugar, and cooking oil for the past 12 months before April.2007.

On average Consumer Price Index (CPI) of retail price for one kilogram had risen as follows; - sugar from Tshs 800 to Tshs 1200, this is 50% price rise, maize flour from Tshs 320 to Tshs 500, this is 56.3% prise rise, rice (normal standard) from Tshs 600 to Tshs 950 this is 58.3% price rise, cooking oil from Tshs 900/litre to 1700/litre this is 88.8% price rise.

Due to this we experienced food inflation with annual rate of more than 50 percent as stated above. On the other words the amount of goods and services which can be purchased by a specific sum of money; given the prices of those goods and services increased by 50% is definitely going to lower consumers’ marginal propensity to consume within the stated period.

The survey results by TCAS indicate that 67 percent of households in Tanzania cannot afford to have three meals a day; however 73 percent could only manage to have two meals a day, whereas 27 percent of the households could only afford one meal per day, this leaves only about 33 percent households that could manage to have three meals or more in a day.

In year 2007 Tanzania government continued on watering seeds of consumers’ welfare destructions; for instance the government increased tax on petrol in 2007-8 - budget, also the government decided to stop giving subsidies to Tanzania National Electric Supply Company Limited (TANESCO) which resulted to 21 percent tariff price increment and up to 250 percent increment on installation fee.

Government’s subsidies is one way of strengthening poor consumers’ right to access to basic services, If Tanzania government decides to stop giving subsidies to TANESCO there is no other way TANESCO can do than to shift the burden to the consumers.

In the Guardian of 6th Sept.2007 there was a statement by the minister of Industries, Trade and Marketing Hon Basil Mramba that the Government is probing why pricing of locally made goods using locally available raw materials are more expensive than imported ones.

What Mramba wants to probe is purely the consequence of rise on fuel tax and what we see on shaken and worsening of Tanzania firms’ competitive position in domestic and overseas markets; against foreign rivals is one of inflation signals however other factors mentioned with definition above might apply.

The other unreported point that influences our local prices especially on our food can be viewed in the PhD thesis done by Dr Bakar Nnunduma for three good years on food management systems in Tanzania Market; he realised that; our poor food handling systems account for 40 percent of Tanzanians food poverty. Our prices on food are not realist because they are inflated to cover the losses that are acquired during the process and handling of our food from source to the markets and later to consumer’s plate.

For instance transporting simple perishable goods like tomato from Iringa to say Dar es Salaam market, given that a trader bought 100 cases of tomatoes from source; the process of taking the stuff from the source-farm to the market can take three to five days. Consequently to this delay about 40 cases equivalent to 40% of bought cases of tomatoes will reach the market while rotten due to poor handling and use of un-refrigerated vehicle like Fuso.

What a trader will do to cover the loss, is to increase price of the remaining 60 cases to cover the loss that had been acquired from the rotten 40 cases of tomatoes.

The end user-consumer is the one who is going to pay for this avoidable negligence that can be reduced by introducing proper policy on transport and transportation of perishable goods in accordance to codex standards for fruits, vegetables, eggs, fish, meat - food stuff in order to preserve the quality at the same time the quantity from being damaged.

I call upon the government and SUMATRA to call for investors on this line. SUMATRA should start thinking on giving licences to companies that can work to reduce the gap of relevant and appropriate means of transportation on food stuff.

As long as consumers comprise of all Tanzania population, its high time for politicians to put consumers’ rights promotion and protection on their agenda to save needs and interests of the entire nation. Tanzania Government should provide and maintain adequate infrastructure to develop, implement and monitor consumers’ protection policies.

Special care should be taken to ensure that measures for consumer protection are implemented for the benefit of all sectors of the population, particularly the rural population and people living in poverty.

The Author is
The Executive Director of
Tanzania Consumer Advocacy Society


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