A recent report by the Common Market for Eastern and Southern Africa (COMESA) Competition Commission reveals that oil firms in the region, including Kenya, overcharged consumers by KSh 67.7 billion between July 2021 and December 2022.
The report, Vegetable Oil Value Chain in East and Southern Africa”, indicates that Kenyan manufacturers sold cooking oil at an average price of KSh 333 per litre, significantly exceeding the fair price of KSh 274 per litre.
This overpricing was attributed to factors such as rising global commodity prices and inflation, but the report suggests that the increases were disproportionate to the actual cost increases.
“These increases happened in the context of rising global crude palm oil prices and sea freight costs.”
“The increases were larger than increases in crude palm prices (input) and, while crude palm oil prices decreased after the first quarter of 2022, prices in the region remained high through to the beginning of 2023, meaning a much bigger gap between the consumer prices and this major input cost,” the commission added.
The Central Bank of Kenya (CBK) in its year-end Monetary Policy report detailed these price changes. Notably, edible oil prices increased in October 2024 due to factors originating from Asia.
The CBK report attributed this increase to higher prices of palm, soy, sunflower, and rapeseed oil, resulting from lower production in key Southeast Asian countries. Increased global demand for biofuels further exacerbated these price hikes.
”Edible oils price inflation increased in October 2024, driven by higher prices of palm, soy, sunflower and rapeseed oils, attributed to lower production in key producing countries in Southeast Asia,” the report by CBK read in part.
The oligopolistic nature of the vegetable oil market, dominated by a few vertically integrated players, has contributed to limited competition and higher prices.
The report calls for increased monitoring of market dynamics and the implementation of measures to promote fair competition and protect consumer interests.
The recent imposition of a 10% import duty on crude palm oil by the East African Community has further exacerbated the situation, leading to higher prices for cooking oil and other essential products.
While the government aims to address the budget deficit, the impact on consumers and the competitiveness of Kenyan industries remains a concern.
