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Analyst call for consumer protection policy

Mon, 27 July 2015 04:09
by Donald Matthys
News Flash

Analyst have called for the creation of a broad consumer protection policy to cushion Namibians from the financial burden created by the mismatch between the soaring standard of living and their earnings.
Most analyst argue that the 10% annual wage increase given by either private or public institutions does not tally with the soaring standards of living.
Michael Gaweseb from the Namibia Consumer Trust (NCT) Namibia does not have a comprehensive consumer protection law neither a policy.
 “Regarding high food prices, this is primarily caused by government protection granted to food producers through infant industry protection, import restrictions, etc. All these undermine consumer protection, therefore even if there is a new consumer protection law, grant to the poor, food bank, the benefit will be minimal as consumers subsidise businesses,” he said.

He added that even the protection in the electricity is cosmetic. “The protection is mere theory. Equally the public transport fares (taxi) is supposedly controlled by ministry of works, but that too does not provide for any consumer input. Fuel price is also regulated by the Ministry of Mines, though fuel price is internationally set through a price fixing arrangement between oil producing countries.”
Renowned Economist, Martin Mwinga stressed that Namibia consumers have a weak bargaining power. “Many consumers are losing their houses, properties, buying expired products and exploited by companies and sellers who operate in a form of a cartel. Many consumers do not have enough information to make a choice and are therefore vulnerable and often exploited by businesses that want to make abnormal profits at the expense of consumers,” he said.
Mwinga added that even lenders always exploit borrowers and charging higher interest rates above the legal allowed rates.
 “The rising interest rate due to higher inflation will increase cost of servicing government debts, tax revenue will decline and government deficit will rise significantly. Overall higher inflation is bad for consumers, home owners, are bad for business and has a negative impact on the economy,” he said.
Mwinga expressed that high inflation is not always good for the economy. “For a country like Namibia that depends heavily on export as a major component of GDP, high inflation will eventually lead to the contraction of the economy,” he said.
He added that ,“The other channel through which high inflation affects the economy is impact on investments – high inflation leads to higher interest rate and higher interest increases the costs of business and private sector will cut down on investment because of rising cost of capital and decline in profit.”
Research Analyst from IJG, Eric Van Zyl  noted that a consumer protection is a positive for the economy. “It contributes positively to economic growth. It is however only effective to the degree that it is enforceable. Thus a straightforward, understandable consumer protection act is of great economic value,” Van Zyl said.
However, he added that higher consumer prices can not force employers to pay their employees higher salaries and that salary negotiations are generally conducted with an eye on inflation.
“Wages and salaries are an input costs in all forms of enterprise. A sustainable business will not be able to pay an employee more than that employee’s contribution is worth to the business. Unsustainable businesses failing is a normal occurrence and if anything, it strengthens the economy,” he said.
Namibia Chamber of Commerce and Industry (NCCI) Chief Executive, Tarah Shaanika, stressed that the cost of living in Namibia is very high and unsustainable for many.
 “A more comprehensive consumer protection act is needed, and one that directly protects the consumer because the suppliers only think of making profit, without protecting the consumer,” Shaanika said.
He added that for a developing country like Namibia, high consumer prices would lead to economic downfall.
Finance Minister Calle Schlettwein said that government is busy with broad based consumer protection act to monitor price hikes in consumer goods and services.
Schlettwein confirmed that the prices of products and services are not favourable with wages that do not increase.
 “We also have a legal base addressing new strategies to deal with these issues. In terms of financial sector and financial consumers, the country is working on a Financial Institutions and Markets (FIM) Bill which was approved by cabinet. It is important that consumers are protected by consumer rights,” Schlettwein said.
However Evans Simaata Sanlam spokesperson said to avoid reaching situations where consumer prices becomes disastrous to individuals, households and the country at large, it is important that government take targeted and effective policy measures to bring inflation back to reasonable and sustainable level.
“However, before any policy measures are taken, it is advisable that government understands the causes of such inflation and implements comprehensive measures that target these causes,” he added.
Simaata noted that it is also an open secret that in Namibia at present, the household income is not increasing at the same pace or fast enough as prices of goods and services.
“This makes consumers worse off as their money whose value has reduced can now afford to purchase less,” he said.
He suggested different economic tools which government can utilise to keep inflation in check, for instance that government can utilise monetary policies, supply side policies, fiscal policies, exchange rate policies, or introduce wage controls.