eBusiness Weekly
Hebert Zharare
As Zimbabwe grapples with a plethora of strategies to arrest the challenges facing the economy; there is a greater need for authorities to have a re-look at the fuel pricing mechanisms.
Zimbabwean motorists and industry continue to be choked by levies and taxes on fuel to clear National Oil Infrastructure Company (NOIC)’s, formerly National Oil Company of Zimbabwe (NOCZIM) legacy debt of over $200 million.
This historical debt, economic observers say, accrued partly due to poor corporate governance matters at the oil company and a long period when Zimbabwe’s fuel was sold at prices below cost and cheaper than in the region.
But since fuel is one of the key economic enablers, if the pricing is left unchecked, some of the many strategies the Government thinks maybe be the panacea to the challenges might not yield desired results.
Already there is talk of possibility of harmonising prices of energy, mainly electricity with the region to lower the cost of doing business in Zimbabwe, as a way of attracting foreign direct investment. When these talks eventually gain traction, the fuel price structure in the country should also be debated as it push to astronomical levels prices of moving passengers and industrial goods.
As of December, Zimbabwean motorists were paying $1,28 per litre for diesel 50 and up to $1,46 for petrol per litre and these prices were approved by the Zimbabwe Energy Regulatory Authority (ZERA).
The prices appear outrageous for Zimbabweans who feel shortchanged by the fuel dealers given some motorists in jurisdictions far afield from seaport cities, pay far less for the commodity per litre.
The fuel prices in Zimbabwe recently triggered debate when Buhera South Member of Parliament Joseph Chinotimba, asked why fuel in Zimbabwe was so expensive. The legislators were unanimous that fuel in Zimbabwe was very expensive because of the taxes added on by Government.
This is one of the major economic matters the new economic order has to address as the country addresses the easy of doing business.
The average world price of fuel as the year closed was $1 per litre. In line with the world trend, the price of petrol in Zambia is around $1,20 per litre while diesel sells at about $1.10 according to the country’s energy regulatory board.
In Malawi diesel price is around $1,13, while petrol is slightly above that, going for about $1,22 per litre. In Mozambique, motorists pay about $0,96 for diesel at the pump, while petrol goes for about $1,04.
Mozambique of course might charge those prices given that the country enjoys access to the oceans unlike other land linked countries like Zimbabwe and Zambia among others. In the Democratic Republic of the Congo, which is far afield from port cities in South Africa and Mozambique, consumers there, are currently paying $1.08 per litre for diesel.
Although figures for petrol could not be readily available, players in the fuel sector say it was slightly above the diesel price per litre.
The petrol price in Botswana is $0,83 while diesel is $0,80 according to official reports. The price of diesel in Namibia is $0,94 while petrol is about $0,93. These prices are after effecting levies and taxes in respective countries.
This then rekindles debate on what should Zimbabwe do to reduce the cost of doing business given the cost of energy, water, labour, taxation and transport among others.
President Mnangagwa has restored hope for business given his thrust that is pro-business he enunciated on his inauguration and State of the Nation Address. Industry expects a cut in taxation, import duty on essential consumables for production and the return of a stable currency.
Economist Tapuwa Mashakada said Zimbabwe still has the potential to become a regional hub as far as fuel distribution network was concerned given the centrality of its position in Southern Africa.
He said its massive infrastructure in Mabvuku-Harare, linked with oil pipeline connecting the port city in Mozambique, makes it competitive for other countries up north to pick their fuel in Zimbabwe.
Unfortunately, the current prices of fuel in Zimbabwe are spiked by the fact that there is an element of legacy debt amortisation that is taking a toll on motorists.
“The challenge we have is we have a legacy debt by NOCZIM, (now NOIC) taken over by Government. The state has to charge motorists to clear the historical debt.
“It’s on record that the debt has to do with poor corporate governance issues. Besides, for a long time our fuel was the lowest in the region and now it is too high because of the legacy debt amortization,” said Mashakada.
University of Zimbabwe Professor of Economics, Albert Makochekanwa, said although fuel landed in Zimbabwe at around $0,80 per litre, the charges levied on the commodity make it more expensive.
He said it was incumbent on Government to realise how that impacted on business costing structures.
“These are Government regulations. It’s up to them to remove them. Our Government should just copy what other countries in the region are doing and remove the charges. Fuel is key to any business. For you to move anything you need fuel. So to business, it’s a huge cost pusher,” he said.
ZERA recently said the prevailing fuel prices in the country are within the provisions allowed by the Statutory Instrument 80 of 2014, which provide the pricing slate.
The fuel regulator chief executive Engineer Gloria Magombo said it is therefore inappropriate to simplistically compare prices in Zimbabwe against other countries in the region as they have different tax regimes, statutory payments as well as different economies.
She said fuel pricing in Zimbabwe is done through Section 54 of the Petroleum Act [Chapter 13:22] of 2006 and is implemented through Statutory Instrument 80 of 2014 which provides the framework for the pricing of fuel.
SI 80 of 2014 set the maximum margins realisable at wholesale and retail of fuel and there is nothing wrong with the pricing according to the regulatory body.
