Questionable Pricing Methods Our Economic Undoing

By David Mugun |Author |Management & Training Consultant|Publisher

Communities residing along our borders know that comparatively, the prices of many products are lower in neighbouring countries.

This is sometimes true for motor fuel. On certain occasions, when a litre of petrol in Kenya is priced higher than it is in Uganda, fuel tank tourism becomes a necessity. The longer distances covered by Uganda's fuel transiting through Kenya, notwithstanding. Taxes here are the tie breaker.

And with this, the knock-on effects on the pricing of transport-dependent goods and services become apparent. We shall return to this shortly.

Elsewhere, a hawker on the streets gets your attention and prods you to buy his shilling denominated wares. A pair of socks for 500 and an electronic gadget for 1,500 but both offered at 1,700. The price plummets when he realizes that you only have 500 and lowers his offer to 700 for both items. The initial combined price of 2,000 has come down by 65 per cent.

This tells us four things. First, it is very possible that the goods are of low quality and that the combined true value is below 500 shillings.

Second, it tells us that the seller is a con artist disguised as a salesman and knows no other way. He is very unprofessional.

Third, it tells us about the naivety of the buyer and very much what the average consumer does or not when making a purchasing decision.

Fourth, if we are wrong on all three points above, then this may point to the level of desperation in the economy. People are willing to liquidate at below cost just because any money now is better than none at all.

Things are dire as we are in a recession.

A top-end men's wear store retails shirts at twice what the frequent traveller spends out there. Many buy online.

Our national carrier Kenya Airways is known comparatively as a pricier airline. Many arguments may be advanced for this but it won't make the math any better.

The cost of land in Nairobi's leafy suburbs is higher than those in functionally equivalent locations in more advanced economies, yet this won't lift us out of the league of third world countries.

This pricey conduit's value appreciated largely because it offered cheats a haven to tuck away corruption proceeds, made possible by the fact that land valuations are not an exact science. Willing buyer, willing seller.

The same high pricing is applicable across many industries and all for a huge return.

The promise of a thriving silicon Savannah is losing out big time to India on simple online assignments on account of pricing.

This crazy pricing says that as a nation, we have bad valuing methods. The African Continental Free Trade Area- AfCFTA, going live in June, may rudely awaken us when better-priced products come in with no more protection for homegrown offers.The low priced eggs from Uganda now wreaking havoc are a sign of things to come. In the long run, this poor pricing culture will export rather than create the desperately needed jobs.

Back to our fuel pricing. Many people link it with the high cost of development now associated with heavy borrowing. Every Kenyan now owes about one hundred thousand shillings at birth. And with the understanding that a huge part of borrowed money, or that generated in tax revenues is lost to corruption, development, as presently promoted by the government, has quickly become unpopular.

This is so because it is contributing to price increases across the board. This also means that corruption is a constant in our pricing arithmetic and when added to exploitative methods employed by many businesses, we have for ourselves the nightmare that many awake to every day, a tough life. For this reason, some global companies have exited Kenya.

It is high time that we got science to determine the demand and supply forces in a moral manner and we faced up to the impact of corruption in our collective pricing regime.

A government determined to fight corruption should compel businesspeople to disclose to consumers how much in their pricing is attributable to the vice. That component is money down the drain as it is not backed up by any corresponding productivity.

So, if an item's landed cost is one hundred thousand, and then fifty thousand is added in duties, and finally, it is sold for two hundred and fifty thousand, the trader must disclose the makeup of his markup. That is what a forthright society is all about.