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 Imposes Sanctions on Alleged Honduran Drug Gang

Treasury department alleges Los Valles group is responsible for smuggling tens of thousands of kilograms of cocaine into US each month More

At 91, Marvel Creator Stan Lee Continues to Expand his Universe

Company's chief emeritus hopes to interest new generation of children in superheroes of all shapes and sizes by publishing content across multiple media platforms More

Photogallery New Drug Protects Against Virus in Ebola Family

Study by researchers at University of Texas Medical Branch, Tekmira Pharmaceuticals is first looking at drug's effectiveness after onset of symptoms 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.
African Media Tries to Educate Public About Ebolai
X
George Putic
August 20, 2014 8:57 PM
While the Ebola epidemic continues to claim lives in West Africa, information technology specialists, together with radio and TV reporters, are battling misinformation and prejudice about the disease - using social media to educate the public about the deadly virus. VOA’s George Putic has more.
Video

Video African Media Tries to Educate Public About Ebola

While the Ebola epidemic continues to claim lives in West Africa, information technology specialists, together with radio and TV reporters, are battling misinformation and prejudice about the disease - using social media to educate the public about the deadly virus. VOA’s George Putic has more.
Video

Video Ferguson Calls For Justice as Anger, Violence Grips Community

Violence, anger and frustration continue to grip the small St. Louis suburb of Ferguson, Missouri. Protests broke out after a white police officer fatally shot an unarmed black teenager on August 9. The case has sparked outrage around the nation and prompted the White House to send U.S. Attorney Eric Holder to the small community of just over 20,000 people. VOA’s Mary Alice Salinas has more from Ferguson.
Video

Video Beheading Of US Journalist Breeds Outrage

U.S. and British authorities have launched an investigation into an Islamic State video showing the beheading of kidnapped American journalist James Foley by a militant with a British accent. The extremist group, which posted the video on the Internet Tuesday, said the murder was revenge for U.S. airstrikes on militant positions in Iraq - and has threatened to execute another American journalist it is holding. Henry Ridgwell has more from London.
Video

Video Family Robots - The Next Big Thing?

Robots that can help us with daily chores like cooking and cleaning are a long way off, but automatons that serve as family companions may be much closer. Researchers in the United States, France, Japan and other countries are racing to build robots that can entertain and perform some simpler tasks for us. VOA’s George Putic reports.
Video

Video In Ukraine, Fear and Distrust Remain Where Fighting has Stopped

As the Ukrainian military reclaims control of eastern cities from pro-Russian separatists, residents are getting a chance to rebuild their lives. VOA's Gabe Joselow reports from the town of Kramatorsk in Donetsk province, where a sense of fear is still in the air, and distrust of the government in Kyiv still runs deep.
Video

Video Five Patients Given Experimental Ebola Drug Said to Be Improving

The World Health Organization has approved the use of experimental treatments for Ebola patients in West Africa. The Ebola outbreak there is unprecedented, the disease deadly. The number of people who have died from Ebola has surpassed 1,200. VOA's Carol Pearson reports on the ethical considerations of allowing experimental drugs to be used.
Video

Video China Targets Overseas Assets of Corrupt Officials

As China presses forward with its anti-graft effort, authorities are targeting corrupt officials who have sent family members and assets overseas. The efforts have stirred up a debate at home on exactly how many officials take that route and how likely it is they will be caught. Rebecca Valli has this report.
Video

Video Leading The Fight Against Islamic State, Kurds Question Iraqi Future

Western countries including the United States have begun arming the Kurdish Peshmerga forces in northern Iraq to aid their battle against extremist Sunni militants from the Islamic State. But there are concerns that a heavily-armed Kurdistan Regional Government, or KRG, might seek to declare independence and cause the break-up of the Iraqi state. As Henry Ridgwell reports from London, the KRG says it will only seek greater autonomy from Baghdad.
Video

Video In Rural Kenya, Pressure Builds Against Female Circumcision

In some Kenyan communities, female genital mutilation remains a rite of passage. But activists are pushing back, with education for girls and with threats of punishment those who perform the circumcision. Mohammed Yusuf looks at the practice in the rural eastern community of Tharaka-Nithi.

AppleAndroid