eBusiness Weekly
Martin Kadzere
Fuel prices may go down after Cabinet approved recommendations by a price stabilisation committee to consider reducing duties and levies on importation of the commodity to reduce the cost of production in Zimbabwe and cushion consumers from a high fuel cost induced price spiral on goods and services.
Zimbabwe’s fuel is the most expensive in southern Africa despite Government introducing a mandatory blending policy, which requires fuel companies to blend unleaded petrol with ethanol to reduce the import bill.
Fuel imports into Zimbabwe are subjected to multiple taxes and duties. Diesel pays excise duty (40 percent), National Oil Company of Zimbabwe levy (1percent), carbon tax (1 percent) and strategic reserve tax levy (2 percent) and petroleum levy (2 percent). Petrol importers pay excise duty (45 percent) NOIC levy (7 percent) carbon tax (4 percent) and strategic reserve levy (2 percent). The duty is calculated on the total invoice value plus insurance.
The Zimbabwe Energy Council, an energy industry advocacy, recently said in a study paper, that Zimbabwe’s fuel was over-priced compared to other land locked to countries whose transport costs and levies were higher.
At the time of the study whose findings were released in July this year, the price of diesel in Zimbabwe averaged $1, 18 per litre. Diesel was sold for $0, 80 cents in Angola, $0, 70 cents in Botswana, $0, 81 cents in Lesotho, $1, 09 in Malawi and $1, 11 in Zambia. While petrol retailed at $0, 95 cents in Angola, $0, 74 cents in Botswana, $0, 95 cents in South Africa and $1, 30 in Zambia.
The price of fuel in Zimbabwe has since gone up with diesel retailing at an average of $1,33 per litre while petrol is now selling at an average price of $1,36 per litre. After paying duties, levies and factoring cost of insurance, fuel importers end up paying more than 100 percent of the invoice value.
The price stabilisation committee, chaired by the Ministry of Industry and Commerce, was set up following a wave of price increases of goods experienced in September and recommended reduction in levies and duties on fuel imports among others.
Zimbabwe is experiencing sustained price increases partly resulting from the shortage of foreign currency that has seen high premiums being charged on the hard currency.
On the parallel market, the transfer exchange rate from bank or mobile money accounts to US dollar cash is around 65 percent while exchange rate for bond note to US dollar cash is 20 percent
The premiums are then passed on to consumers through higher prices of most goods and services, exerting inflationary pressures on the economy.
Zimbabwe imports 65 percent of commodities mainly from South Africa and foreign currency shortages have seen retailers and manufactures sourcing hard currency on the black market.
“Transport costs directly translate to price hikes of goods and over the past two months, there has been an increase in fuel prices. If the country is to achieve price stabilisation then fuel prices need to be stable,” said one Government source privy to the development.
Zimbabwe collected $191 million from excise duty in the third quarter of 2017 mainly driven by tax revenue from fuel imports. Diesel imports rose by 20,8 percent in the third quarter of this year to 234,41 million litres while petrol imports declined by 54,2 percent to 48,9 million litres.
The committee recommended the need for sufficient supplies of fuel as unavailability of the commodity would give negative signals to the public and economy at large.
This comes as the Confederation of Zimbabwe Industries has consistently said that fuel pushes up the cost of production.
“Fuel is the major component in production and what we have asked is the reduction of some of the taxes. If there is a reduction (of duties and levies), it means fuel prices will come down and this will also lower production costs and prices of commodities,” said CZI president Sifelani Jabangwe. He, however did not indicate the magnitude of the proposed reduction
The committee also said there was need to revive the mass transport system in the medium term in order to reduce fuel requirements.
Other recommendations, split into two—short and medium term— are expected to bring sanity to price increase madness, which has also massively eroded the incomes.
Some of the recommendations include fastracking the approval of the Consumer Protection Bill and investigations into collusive and anti-competitive tendencies behavior by local firms producing basic commodities, according to a copy of recommendations seen by Business Weekly.
It also approved that local oil expressers should publish recommended prices for cooking oil and that an inter-ministerial committee should be set up to enforce registration of informal sector players. It also called for the Consumer Council of Zimbabwe to publish recommended prices of commodities and intensify consumer education on their rights.
Further, the committee said Government needed to fully patronize the cyberspace and social media to highlight the performance of the economy such as growth and availability of essentials commodities.
According to the committee, there is also need to adequately fund the operationalization of the National Competitiveness Commission whose board has just been appointed, enhance ICTs in clamping down smugglers of basic commodities, consistency in implementation of investment policies and laws and confidence building encompassing an immediate strategy to improve consumer confidence by ensuring the goods are available on the market.
The Cabinet also approved recommendation to enhance production of edible oil raw materials to cut the import bill currently around $200 million by boosting soya bean production, effective communication of existing export incentive facilities, accelerate developing a Local Content Policy and speeding implementation of Special Economic Zone.
Also recommended was the acceleration of operationalisation of Bureaux de Change to deal with diversion of foreign currency to the black market, synchronization of export regulations and procedures and the amendment of identified 22 Statutory Instruments to address complex procedures on exports. The committee said in the medium term, Zimtrade should embark on aggressive export development and promotion of value added products from the manufacturing sectors to grow, promote self regulation and implement the social contract within the framework of the Kadoma declaration.
