News / Africa

Price Controls Cause Chaos in Ethiopian Markets

Price controls on many staple food items ordered by Ethiopia's government early this month have reduced grocery bills for many low-income families. But now shopkeepers are upset and some basic items are disappearing from store shelves. Economists are concerned about the long-term effect of the government's price-fixing strategy.

Confusion has been the order of the day at shops and markets across the Ethiopian capital this month. The government surprised businesses on January 6, the Ethiopian Christmas Eve, by announcing price caps on such items as meat, bread, rice, sugar, powdered milk and cooking oil.

Prime Minister Meles Zenawi said the caps were a response to price gouging by merchants taking advantage of global price hikes. He vowed to put a stop to what he called "market disorder.”

Consumers respond

The news was seen as a Christmas gift by many cash-strapped consumers, who had seen food prices jump after the government devalued the local currency, the Birr, by 17 percent in September.

In the first days after the price controls went into effect, Shenkut Teshome was among shoppers who rushed to markets to scoop up goods at newly lowered prices. He applauded government intervention as the only way to save impoverished Ethiopians from starvation.

"People are hoping they can buy with their salary a fair material at a fair price," said Shenkut. "[Prices] were exaggerated and people cannot afford to buy with their salary and live at the same time, paying rent, this and that. The main thing is that they have enough food for their children."

The price controls, however, have triggered chaos and tension in the local marketplace. Arguments, even occasional fistfights have been reported between irate shoppers and business operators as price controlled goods, such as cooking oil and oranges, have disappeared from shelves.

One customer at a local shop, who spoke on condition of anonymity, quipped that the net effect of the price controls is that nothing has changed. He said that earlier, goods on the shelves were too expensive to buy. Now the prices are lower, but the goods have disappeared.

Shopkeepers discouraged

Business owners said the past few weeks have been unbearable. Customers are unhappy, some products they bought before the price caps must be sold below cost, and neighborhood government representatives drop by several times a day to check that they are in compliance.

Shopkeepers contacted for this report all said they were afraid to give their names, but one who agreed to speak anonymously said she was ready to give up.

She said, "This is way too much for us. We are small traders. We don’t make much money. We get everything on credit, so when this stock is gone, we are closing up shop."

Government defends

Representatives of Ethiopia’s Trade Ministry did not respond to numerous interview requests for this report. But government officials have been quoted as saying price controls were needed because retailers had raised prices blaming global price increases and the devaluation, although such factors had had no influence on the availability of their products.

In addition, four economists not affiliated with the government, all of whom have previously spoken to VOA on the record, declined to be quoted this time, saying the subject was too sensitive. But all four privately predicted that price fixing would not help in solving Ethiopia’s deep-rooted economic problems.

Temesgen Zewdie, finance chairman of one of Ethiopia’s main opposition parties and a former Member of Parliament, called the price controls a step toward a Communist-style command economy.

In a free market economy, the preferred way of doing this is to increase the supply and increase competition," said Temesgen. "But the government did not do that. Instead they went directly to the producers and retailers, telling them to reduce prices and supply these products. These practices happen in Communist states, not in western democracies."

Critics warn

Retired opposition leader Bulcha Dimeksa is a former deputy finance minister and also a former World Bank director. He said history has proven time and again the folly of price controls.

"This government is doing exactly what all the classical dictators in the past have done and have failed," said Bulcha. "I do not understand how people do not learn. It does not work. Price control never worked. It will not work. It does not work. It may work for one month, but what’s that? The farmer is discouraged, the producer is discouraged, the retailer is discouraged."

Despite the uproar, government officials are hoping their experiment in price-fixing will help to curb inflation. Recently released figures show the inflation rate jumped from 10.2 percent in November to 14.5 percent last month.

Ethiopia is among the world’s poorest countries. The CIA World Factbook lists per capita purchasing power of $1,000 a year.

You May Like

US Gives Malaysia Questionable Upgrade in Human Trafficking Ranks

Malaysia’s upgrade seen as removing barrier to country’s participation in the US-led 12-nation Trans-Pacific Partnership More

Turkey, US Try to Establish Buffer Despite Differences

Coalition airstrikes in proposed zone would aim to drive out Islamic extremists, allowing targeted area to come under sway of anti-Assad rebels More

Video US: Millions Exploited by Vast Fortunes of Human Trafficking

State Department's annual report calls exploitation 'modern slavery,' brutalizing girls, women into prostitution and forcing men, women and children into low-wage jobs across the globe 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.
US Calls Fight Against Human Trafficking a Must Wini
X
July 28, 2015 12:21 AM
The United States is promising not to give up its fight against what Secretary of State John Kerry calls the “scourge” of modern slavery. Officials released the country’s annual human trafficking report Monday – a report that’s being met with some criticism. VOA’s National Security correspondent Jeff Seldin has more from the State Department.
Video

Video US Calls Fight Against Human Trafficking a Must Win

The United States is promising not to give up its fight against what Secretary of State John Kerry calls the “scourge” of modern slavery. Officials released the country’s annual human trafficking report Monday – a report that’s being met with some criticism. VOA’s National Security correspondent Jeff Seldin has more from the State Department.
Video

Video Iran Nuclear Pact Wins Few New US Congressional Backers

Later this week, President Barack Obama returns from a trip to Africa to confront a U.S. Congress roiled by the nuclear accord with Iran, an agreement that has received the blessing of the U.N. Security Council. Days of intensive lobbying and testimony by top administration officials have won few new congressional supporters of the pact. VOA’s Michael Bowman reports.
Video

Video Washington DC Underground Streetcar Station to Become Arts Venue

Abandoned more than 50 years ago, the underground streetcar station in Washington D.C.’s historic DuPont Circle district is about to be reborn. The plan calls for turning the spacious underground platforms - once meant to be a transportation hub, - into a unique space for art exhibitions, presentations, concerts and even a film set. Roman Mamonov has more from beneath the streets of the U.S. capital. Joy Wagner narrates his report.
Video

Video Obama Encourages Kenya to Fix Cultures of Corruption, Discrimination

President Barack Obama bid farewell to Kenya Sunday with a major speech at as stadium outside the capital Nairobi where he called on Kenyans to change the cultures of corruption and discrimination that can hold society back. VOA East Africa Correspondent Gabe Joselow has the story.
Video

Video Europe’s Twin Crises Collide in Greece as Migrant Numbers Soar

Greece has replaced Italy as the main gateway for migrants into Europe, with more than 100,000 arrivals in the first six months of 2015. Many want to move further into Europe and escape Greece’s economic crisis, but they face widespread dangers on the journey overland through the Balkans. VOA's Henry Ridgwell reports.
Video

Video Stink Intensifies as Lebanon’s Trash Crisis Continues

After the closure of a major rubbish dump a week ago, the streets of Beirut are filling up with trash. Having failed to draw up a plan B, politicians are struggling to deal with the problem. John Owens has more for VOA from Beirut.
Video

Video Paris Rolls Out Blueprint to Fight Climate Change

A U.N. climate conference in December aims to produce an ambitious agreement to fight heat-trapping greenhouse gases. But many local governments are not waiting, and have drafted their own climate action plans. That’s the case with Paris — which is getting special attention, since it’s hosting the climate summit. Lisa Bryant takes a look for VOA at the transformation of the French capital into an eco-city.
Video

Video Racially Diverse Spider-Man Takes Center Stage

Whether it’s in a comic book or on the big screen, fans have always known the man behind the Spider-Man mask as Peter Parker. But that is changing, at least in the comic book world. Marvel Comics announced that a character called Miles Morales will replace Peter Parker as Spider-Man in a new comic book series. He is half Latino, half African American, and he is quite popular among comic book fans. Correspondent Elizabeth Lee reports from Los Angeles.
Video

Video California Towns Welcome Special Olympics Athletes

Cities and towns in Southern California are greeting thousands of athletes who are arriving for Special Olympics, a competition for people with intellectual disabilities. The games will run from July 25th through August 2nd. VOA's Mike O'Sullivan reports from Pasadena, California, where athletes from Namibia, Singapore and Tanzania got a rousing welcome from local residents.
Video

Video Critics of Japan Defense Policy Focus on Okinawa

In Okinawa, many locals have long complained that Tokyo places an unfair burden on the tiny island by locating most of Japan's U.S. military bases there. As Japan's government moves toward strengthening and expanding the country's defense policies, opponents of those plans are joining local protesters in Okinawa, voicing concern about where the country is headed. VOA’s Brian Padden reports from Okinawa.
Video

Video IS Uses Chemical Weapons in Syrian Attack

Islamic State militants have added a new weapon in their arsenal of fear: chemical weapons. VOA Kurdish service reporter Zana Omer was on the scene within hours of a recent attack in Hasakah, Syria, and has details of the subsequent investigation, in this report narrated by Miguel Amaya.
Video

Video Historic Symbol Is Theme of Vibrant New Show

A new exhibit in Washington is paying tribute to the American flag with a wide and eclectic selection of artwork that uses the historic symbol as its central theme. VOA’s Julie Taboh was at the DC Chamber of Commerce for the show’s opening.
Video

Video Hoverbike Flying Toward Reality

Another long-standing dream of many technological inventors is quickly approaching reality: U.S.- and British-based firms are cooperating in the development of an individual flying platform they call a hoverbike. They say it may revolutionize the concept of flying, including in the U.S. military. VOA’s George Putic reports.
Video

Video As Japan Expands Defense Role, Protests Follow

The Japanese government is moving forward with a controversial security bill that would authorize the military to fight abroad for the first time since World War II. Leaders say it is critical to defend against rising threats from China and North Korea. VOA’s Brian Padden reports from Japan on the big changes ahead, and the opposition they are drawing.
Video

Video Replacing Poppies with Coffee in Myanmar

The remote mountains of Myanmar’s Shan state are home to the second-largest opium-producing region in the world. After a drop during the 2000s, production surged in the past eight years to feed an increasing demand for heroin in China. But farmers are now making less on the crop, and the U.N. is hoping many will make the switch to growing coffee. Daniel de Carteret reports for VOA from Taunggyi.

VOA Blogs