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Other Articles from The Villager

High production cost pushing prices up

Mon, 22 September 2014 17:36
by Timoteus Shihepo
Business


Namibia Competition Commission (NaCC) has said the rising cost of locally produced chicken is being fueled by the high cost of production on the country.
Namibia is experiencing ever-increasing prices of basic commodities which has resulted in local products costing more than foreign products.
Speaking to The Villager, NaCC’s Director of Economics & Sector Research Dr. Michael Humavindu said the inability of the country to produce its own input among other factors is what is driving the prices up.
“Input prices to produce the local products are an important determinant of high end product prices, especially where such inputs are sourced internationally. Secondly, there also seems to be some price premiums extracted during the distribution channel of the product to the shops. Thirdly, the pricing relations between producer and retailer might also give way to some pricing rent extractions.
The question then is whether such pricing rent extraction or what they call marketing margins are efficiently priced or whether the country could look at other alternatives, such as subsidized transportation by say TransNamib from farm gate to retail shelf. The NaCC will investigate deeper into the distribution channel and issues of buyer power between producer and retailer next year,” he said.
Humavindu also said the reason why sometimes local product prices like chicken prices are higher than that of foreign products at the end of the day is competitiveness in terms of production which he says sometime can lead to inequality.
“Rising commodity prices, especially of basic items not luxurious ones are a source of concern for everyone as this could impact on our pressing matters of concern-inequality and poverty,” he said.
Humavindu added that  NaCC is developing a price monitoring regime to assess and review, on a constant basis, the price and cost structure of certain industries that are amenable for industrialization schemes such as the Infant Industry Protection.
The price monitoring regime is looking to collect market intelligence on sectors such as Namibia’s retail, automotive, franchising and manufacturing sectors to gain a better understanding of how these work.
“This is not regulation or price control, rather it is monitoring to ensure that the end price derived at their farm gate or factory price truly reflects the cost structure,” said Humavindu.
He however said that NaCC does not have the authority to reduce the prices or to recommend that prices be controlled.
“The NaCC can only engage in price monitoring, not price controls. The appropriate authority to ponder on price controls and regulations aspects is the Ministry of Trade and Industry.”
He added there are challenges associated with controlling prices in the economy and should government impose prices it could lead to a conflict.
 “There could be a danger that imposed prices by a government authority could render the producer much more inefficient, thereby leading to unsustainability and thereby rendering our industrialization ambitions to nothing,” he said.
Humavindu then said, “The Namibia Competition Commission is busy reviewing its domestic legislation and it has included relevant provisions of price monitoring, to ensure that such a function is fully mainstreamed into its work.”