Dr Godfrey Asiimwe
9 May 2008
opinion
The Minister of Finance, Dr Suruma, has strongly maintained a non-regulation policy regarding sky-rocketing commodity prices (Daily Monitor, May 5). These prices are believed to be caused by market forces triggered by increasing demand from our neighbours, especially southern Sudan and Kenya.
Prices have increased not only in food with a kilo of beans reaching Shs2,000, but also diesel that has overtaken petrol and salt, the most basic and cheapest household commodity. The president alluded to the advantages, basing on the "trickle down" aspect of the high prices that will be reflected in high "farm gate prices" for hitherto poor rural producers.
Some sections of the public are calling for state intervention and regulation of the spinning prices, for the sake of the poor consumers. But Suruma strongly maintains that "For the government to come in and stop these soaring prices distorts the economy yet we don't want to go back to where we were many years ago."
The government, therefore, will sit and watch the contest between market forces versus the consumers. The rural poor's food requirements are cushioned by the subsistence rain-fed sector.
However, frontline services like Healthcare and Tertiary Education dues will be harder as private owners must meet higher commodity and service prices and also make profit. This will erode the presumed high farm-gate prices they will have got from the high sales. But, in reality, do all the rural producers necessarily get the high prices for their produce? How much, for instance, is the difference between the lowest rural farm price and consumer price in Nakasero?
Consider the high transport costs due to poor rural roads worsened by rains, high diesel prices and a marketing chain full of profit hungry intermediaries. Most petty peasant producers are "price takers" because of multiple market driven monetary pressures and remoteness of their rural dwellings. High prices could mainly benefit rich producers who have high market power, and intermediary traders, but also if transaction costs were not increased by high diesel costs.
The urban salaried, middle income, poor and un-employed are most in trouble as they do not have the subsistence cushion for food. Whereas the government does not want to intervene in the market driven food prices, government machinery is sustained cheaply by these salaried on low government set non-market driven salaries.
There is the thorny problem:- How to survive with a state-set Shs 300,000 salary in market driven prices of healthcare, where treatment for the common malaria is a minimum of Shs 20,000 plus school fees.
Worse still with a university going child or relative from the village outstrips your earnings and with charcoal at Shs 23,000 a sack. Drowning salaried earners are clinging onto 23% interest Micro-finance credit for household recurrent expenditure.
High charcoal prices will increase the depletion of forests like Mabira with no need of demonstrations and attendant costs like deaths.
The escape route will continue to be worker's escape into sectors like peri-urban farming for supplementary earnings and the informal sector.
Escape into these will undermine performance at place of work, unless there are possibilities of cheating by inflating claims of office toner, fuel, off-station allowances, or exchange parts of that government Pajero with old ones.
Market driven prices for food, frontline services, transport, water and electricity bills must be got and the means justifies the end. As for some of the extreme poor and small scale "entrepreneurs" like the bodaboda cyclists, hawkers, food vendors, garage attendants, their survival could require shifting to waterlogged Bwaise shacks (mizigo), that reservoir/breeding ground for crime.
Here, desperado courage defeats morality, with high risks in prostitution and breaking houses to steal a Shs15,000 car mirror
The writer is Head of Development Studies, Makerere University
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