Zimbabwe fuel still remains highest in Sadc

Published: 31 January 2018

Fuel costs in Zimbabwe are still much higher than anywhere else in the region even after government decreed fuel retailers to cut the price of petrol and diesel by up to 7,5 percent after a tax cut, economic experts have said.

High fuel prices have caused the costs of goods in the shops to stay too high, and the latest edict is part of a drive by the new government of President Emmerson Mnangagwa to slash prices that had rocketed ahead of a key general election due in four to five months.

The slash was also designed to absorb the impact of rising international fuel prices after the consolidation of crude oil prices which consequently followed Organisation of the Petroleum Exporting Countries (Opec)'s supply cuts.

Energy and Power Development minister Simon Khaya Moyo said on Tuesday last week the government had fixed petrol price at $1,35 per litre, down from $1,41 while a litre of diesel now retails for $1,23 from $1,33.

The price cut came just after government had slashed the import duty on fuel by as much as 17 percent.

"I expect and trust that this important decision by the government shall be implemented by all concerned parties. I therefore expect nothing less than immediate compliance," Khaya Moyo said in a statement.

Key industry representative bodies the Confederation of Zimbabwe Industries (CZI) and Zimbabwe National Chamber of Commerce (ZNCC) responded to government's move to lower excise duty on fuel imports by issuing a collective statement saying it shall incorporate fuel price reduction into its pricing structures, which will result in the pricing of some basic commodities falling by ranges of 1 percent to 5 percent.

It went further projecting that after this cut, the overall consumer price index will fall further from the 1,2 percent increment experienced over the 2016-17 period.

Financial research firm Equity Axis said on the surface, it clearly is rational and typical for business to inform its pricing using the cost structure as a basis thus implying that a variation in cost may result in price shifts all else being constant.

"In order for one to appreciate inflation behaviour, an appreciation of its background and causatives is also important and this notion appears to elude ‘industry bodies.' It is with shock that industry wants Zimbabwe to appreciate that it can now solve inflation or ensure price stability after government's excise duty cut on fuel," Equity Axis said in a commentary.

"The average increases in the price level up-to three weeks ago, had absolutely no relationship to fuel prices.

"Until three weeks ago, fuel pump prices were stable before a circa 5c increase per litre which was later to be neutralised by government's decision to lower excise duty on fuel by a similar margin."

Equity Axis said all these developments transpired under three weeks and this had no relationship whatsoever to the gains in inflation from March to December. In fact, it said, if industry adjusted its prices within the last three weeks, it can only be reflected in January CPI numbers which are yet to be released.

"By suggesting that a cut in prices is imminent, industry is taking government and the generality for a ride," the leading financial research firm said.

"If the cuts emerge under such a guise, it may clearly show that the protracted surge in prices over 2017 was unfair and unjustifiable."

The prevalent inflation is a culmination of monetary and liquidity factors such as low relative forex receipts and excessive government open market operations which grossly undermined the economy's ability to hold stable prices, Equity Axis said.

"We further believe that this trend can only be mitigated and reversed through fiscal (expansionary) and monetary policy shift (tightening) , liquidity injection and BOP rebalancing and not fuel price cuts."

Veteran economist John Robertson said he hopes this is just the start of a long list of cuts.

"High fuel prices have caused the costs of goods in the shops to stay too high, so we might see some of them come down," he told the Daily News.

"With the lower excise duties in place, fuel costs in Zimbabwe are still much higher than anywhere else in the region.

"Finished goods prices would come down further if other import duties were reduced, if interest rates were lower and the companies did not have to pay for so many permits and licences.

"We should all be urging government to remove the charges that go with every company registration procedure as all these charges give manufacturers and retailers excuses to increase their prices. South African goods sold in Zambia are much cheaper than the costs of the same South African goods sold in Zimbabwe. That should not be the case and perhaps you could publish price lists of a selection of branded products to show how prices compare, month by month."

Former Finance minister Tendai Biti said Zimbabwe's fuel prices remain very high compared to other countries in the sub-region.

"Our fuel is overpriced anywhere even with the cut, it remains the highest in the sub-region," he said.

"The fuel price in Zimbabwe is too high, it's supporting a strong infrastructure of predatory arbitrage, in simple terms matsotsi. These individuals must be investigated," Biti told the Daily News.

The country's neighbours Botswana, South Africa, Namibia, Tanzania and Swaziland all have cheaper petrol costing $1,06, $1,14, $1,08, $1,27 and $1,14 per litre respectively.
- dailynews