News / Africa

Ethiopia Sells Cooking Oil, Sugar to Correct 'Market Failure'

Addis Ababa residents standing in long lines to buy sugar and edible oil
Addis Ababa residents standing in long lines to buy sugar and edible oil
TEXT SIZE - +

Ethiopia’s government has begun selling some basic food items directly to consumers after imposing price controls that created shortages in the marketplace. Long lines are becoming a regular sight in Addis Ababa as people queue at government shops for sugar and edible oil.

Tesfanesh Zewde stood in line for more than an hour in the hot sun this week to buy a liter of cooking oil and two kilograms of sugar for her family.

Tesfanesh says she was forced to leave her office during work hours and queue at a government-operated fruit stand for items that until recently had been easily available in neighborhood shops.

Sugar, cooking oil and other items disappeared from store shelves in January, after Ethiopia imposed price ceilings on 18 basic commodities. The controls were ordered about the time food riots in Tunisia triggered the political unrest that spread across North Africa and the Middle East.

Local media hailed state intervention in the market as a bold move to help cash-strapped consumers cope with soaring global food prices.

But shop owners rebelled. They complained the ceilings were too low to allow them a fair profit, and refused to sell at what they said was a loss.

When price-controlled items became scarce, the government accused suppliers of creating artificial shortages. Prime Minister Meles Zenawi last month announced that the market had effectively failed. He said the government would bypass retailers and sell directly to consumers until the business community accepted the lower prices.

"We plan to flood the market to overcome artificial shortages that have been created through inefficiencies in the market system. This includes artificial shortages in edible oil and sugar. We intend to import lots of edible oil and sugar and flood the market to ensure it is stabilized," Zenawi said.

Ethiopia’s Trade and Industry Ministry was assigned the job of setting fair prices and profits for controlled items.

Efrem Woldesellassie, head of the ministry’s regulatory affairs department, says a government survey determined that the market failure was due to excessive profits charged by wholesalers and retailers. He said the ministry decided to limit profits to 4-6 percent on sugar and cooking oil.

"These people. They used to get big profits, even without paying any tax to the government, but this time they got a profit [of] 6 percent for sugar, 4 percent for palm oil. To my understanding, covering all costs, this profit margin is sufficient for them to survive," Woldesellassie said.

Efrem says price controls and government sales outlets are a temporary measure until the market stabilizes. But market economists and business people argue any state interference in the buyer-seller relationship is ultimately counterproductive.

Ethiopian Chamber of Commerce President Eyessus Work Zafu says the price ceilings are another step in a long-term trend in Ethiopia toward greater state control over the economy.

"The government is becoming more and more preponderant in the economy in recent years, more than even 10 years ago. The long-term solution is not working on the assumption that government alone could bring about the balanced and rapid sustainable econ growth and development.  It cannot.  That paradigm has been tried for many years and failed." Eyessus said.

Eyessus says he sees great danger in the state’s increasing tendency, when economic policies don’t work, to demonize the private sector.

"When the first price control measures were announced, we started reading in the paper a very serious malignant hate campaign, letters, articles in the papers, and many have been engaged in widening the split between consumers and merchants or business people. [The] government will have to take the initiative to normalize things, because if the government does not, the differences will widen, and the ultimate consequences could be serious," Eyessus said.

Economists also question whether the price caps are helping to keep down rising costs. The government statistics agency reports an inflation rate of 14 percent in February, the first full month the caps were in effect.

And when the controls are inevitably removed, experts say prices are bound to jump to where they would have been anyway.

People waiting to purchase cooking oil and sugar this week wondered whether, given the rapid rise of global prices, Ethiopia might again see the day when local governments distribute food, as they did during the Communist era.

You May Like

Multimedia Anti-Keystone XL Protests Continue

Demonstrators are worried about pipeline's effect on climate change, their traditional way of life, health and safety More

Thailand's Political Power Struggle Continues

Court gave Prime Minister Yingluck Shinawatra until May 2 to prepare her defense over abuse of power charges but uncertainty remains over election timing More

Malaysia Plane Search Tests Limits of Ocean Mapping Technology

Expert tells VOA existing equipment’s maximum operating depth is around 6 kilometers as operation continues on ocean bed for any trace of MH370 More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Pet Kangaroo Helps Spread Environmental Messagei
X
Penelope Poulou
April 22, 2014 5:53 PM
Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pet Kangaroo Helps Spread Environmental Message

Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pro-Russian Separatists Plan 'Federalization Referendum' in Eastern Ukraine

Pro-Russian separatists in eastern Ukraine say they plan to move forward next month with a referendum vote for greater autonomy, despite the Geneva agreement reached with Russia, the U.S. and Ukraine to end the political conflict. VOA's Brian Padden reports from the city of Donetsk in Eastern Ukraine.
Video

Video Pope Francis Hopes Dual Canonizations Will Reconcile Church

On April 27, two popes - John the XXIII and John Paul II - will be made saints in a ceremony at St. Peter’s Square. VOA religion correspondent Jerome Socolovsky says the dual canonization is part of the current pope’s program to reconcile liberals and conservatives in the Roman Catholic Church.
Video

Video In Capturing Nature's Majesty, Film Makes Case for Its Survival

French filmmaker Luc Jacquet won worldwide acclaim for his 2005 Academy Award-winning documentary "March of the Penguins". Now Jacquet is back with a new film that takes movie-goers deep into the heart of a tropical rainforest - not only to celebrate its grandeur, but to make the case for its survival. VOA's Rosanne Skirble reports.
Video

Video Boston Marathon Bittersweet for Many Runners

Monday's running of the Boston Marathon was bittersweet for many of the 36,000 participants as they finished the run that was interrupted by a double bombing last year. Many gathered along the route paid respect to the four people killed as a result of two bombings near the finish line. VOA's Carolyn Presutti returned to Boston this year to follow two runners, forever changed because of the crimes.
Video

Video International Students Learn Film Production in World's Movie Capital

Hollywood - which is part of Los Angeles - is the movie capital of the world, and many aspiring filmmakers go there in hopes of breaking into the movie business. Mike O'Sullivan reports that regional universities are also a magnet for students who hope to become producers or directors.
Video

Video Pacific Rim Trade Deal Proves Elusive

With the U.S.-led war in Iraq ended and American military involvement in Afghanistan winding down, President Barack Obama has sought to pivot the country's foreign policy focus towards Asia. One aspect of that pivot is the negotiation of a free-trade agreement among 12 Pacific Rim nations. But as Obama leaves this week on a trip to four Asian countries he has found it very difficult to complete the trade pact. VOA's Ken Bredemeier has more from Washington.
Video

Video Autistic Adults Face Housing, Job Challenges

Many parents of children with disabilities fear for the future of their adult child. It can be difficult to find services to help adults with disabilities - physical, mental or emotional - find work or live on their own. The mother of an autistic boy set up a foundation to advocate for the estimated 1.2 million American adults with autism, a developmental disorder that causes communication difficulties and often social difficulties. VOA's Faiza Elmasry reports.
AppleAndroid