eBusiness Weekly
Africa Moyo
Government says manufacturers should continuously review their production costs so as to remain competitive, both locally and globally.
This comes as fuel prices have been trekking upwards in the last few weeks on the back of rising oil prices on the international market.
On January 22, Government slashed excise duty on fuel products to ensure production costs come down.
Duty on petrol came down to $0,385c per litre from $0,45c, leaving the price at $1,35c per litre.
But geopolitical tensions in the
Middle East and attempts by Oil Producing and Exporting Countries (Opec) to throttle supply to force a price increase, have pushed fuel prices up across the country.
Oil prices were $72,24c per barrel,
having risen from $47 per barrel in December 2016. Local petrol prices are now at $1,41c.
While fuel prices have not risen
considerably to warrant price adjustments, Government has warned that producers should avoid unnecessary price hikes.
Industry, Commerce and Enterprise Development Minister Dr Mike Bimha said, “Fuel prices fluctuate (and) it’s something that you can’t predict and most of the time we can only react.”
“But we believe when our price was very high, it was not because of international prices, but taxes and this is what we have been trying to manage,” he said.
Dr Bimha said serious companies should always look at their costs and explore opportunities of reducing them to remain relevant in the market.
Confederation of Zimbabwe
Industries (CZI) president Sifelani Jabangwe, told Business Weekly that the rise in fuel prices does not warrant a review of prices of goods at the moment.
“In terms of competitiveness, we are not getting any worse.”
He also conceded that the rise in fuel prices is not a creation of local retailers, but a response to international dynamics.
Cost of doing business campaign
Zimbabwe is enmeshed in efforts to reduce the cost of doing business to attract more investors and cut prices.
There is a plethora of laws businesspeople contend with to register companies and during operations. For instance, the mining sector has 16 different laws, implying delays in starting operations and the attendant high charges at any given point.
Last year, Zimbabwe was ranked 159th out of 190 countries on the ease of doing business index, despite efforts to address constraints since 2015. About 11 laws out of proposed 14 have been passed while others are at various levels of completion. Some of the laws passed include the Public Procurement and Disposal of Public Assets Act, and the Movable Property Securities Interests Act.
But costs have remained.
Government says it is committed to finding a lasting solution to the cost of production jigsaw puzzle.
Dr Bimha said: “There is need to continuously monitor our costs. We agreed that our production costs are on the high side but they are not reduced by one thing; it has to be done in holistic manner, and it takes time, it’s a process.”
“We must continue all that we are doing now and due to the Rwandan experience (we have gotten), which is to do with streamlining activities and that will improve the cost of doing business.
“Our competitiveness commission (NCC) is looking at that. Where we can reduce them through Government intervention, let’s do it. But companies on their own must continue to look into their costs if we are to become competitive,” the minister said.
Forex situation under threat
But there are fears that the continued rise in fuel prices would stretch the national foreign currency situation to the limit. Zimbabwe is battling fierce foreign currency shortages due to low exports, and rent-seeking behaviour by some bankers who reportedly supply the parallel market with hard currencies for resale at higher prices. The country now requires more fuel than in previous years given the rising confidence that entrepreneurs have following the coming in of the new administration. This could lead to a spike in demand for foreign currency, particularly after indications by Total CEO Patrick Pouyanne last week that oil prices might hit $100 by year end.
Said Mr Jabangwe: “There has been an increase in the consumption of fuel. We now need to increase our budget on fuel and it’s going to put pressure on the demand for foreign currency.
“Fuel demands more foreign currency than any other commodity and my biggest worry, and we will require an increase in exports to overcome that.”
Mr Jabangwe proposed the adoption of modern technologies such as the use of hybrid cars which are more efficient.
While hybrid cars have already become taxis in other countries, they are yet to be launched in Zimbabwe.
Major fuel dealers
in Zimbabwe
Puma Energy
Zuva Petroleum
Total Zimbabwe
Engen Petroleum Zimbabwe
Trek Petroleum Zimbabwe
Petroltrade Private Limited
