HomeBusiness DigestBudget pushes fuel prices up

Budget pushes fuel prices up

Kuda Chikwanda

FINANCE minister Samuel Mumbengegwi made life harder for the business community and ordinary Zimbabweans as fuel shot up from around $250 000 a litre

to between $320 000 and $350 000 a litre. Importers immediately cushioned themselves from increases to the price of fuel made Mumbengegwi in his mid-term fiscal budget by pushing increases to the price of fuel to the end user.

Mumbengegwi increased the customs duty on petroleum products, the National Oil Company of Zimbabwe (Noczim) debt redemption levy and carbon tax to $5 000, $2 500 and $5 000 a litre respectively.

However importers reacted by passing on the cost to the customer resulting in the price of fuel on the parallel market — the only place where it is currently being found. Prices shot up to between $320 000 and $350 000 a litre this week.

The increases reflected some form of government turnaround from its stance that price increases were unjustified but there was no progress on the front of negotiations with business over price increases in excess of 20%.

Government has already stated that it believes in blanket mark-ups of 20% to all commodities and has stressed to the business community that it believes that the 20% markup will provide “healthy” profit margins.

Business has argued that as long as government cannot guarantee sufficient foreign currency resources for the business community and also secure adequate fuel supplies, businesses will be forced to source them from the parallel market and prices will continue to increase.

The increases in duty, carbon tax and the Noczim debt redemption levy are likely to yield nothing for government, the business community and end-users for as long as fuel remains a scarce commodity in the country.

Government is battling to secure adequate fuel imports but has failed repeatedly with suppliers refusing to continue supplying Zimbabwe over non-payment of debts.

Zimbabwe needs over US$130 million a month to secure sufficient fuel for the nation’s requirements.

Confederation of Zimbabwe Industries (CZI) president Callisto Jokonya said businesses had been sourcing their foreign currency and fuel requirements on the parallel market for over five years now.

Jokonya said in their view the parallel market was supposed to be called the free market as it was the only market where market forces interacted freely.

“I call it the free market and not the parallel or black market because it is the market where free market forces interact. And business has operated on the free market for the past five years, in that period never got our foreign currency or fuel from the official market.”

Jokonya said while the increases would hurt industry owing to fuel being a major cost driver, business had become accustomed to paying through the nose for foreign currency and fuel supplies.

He added that Mumbengegwi’s adjustments to fuel prices was a clear admission by government that it was impossible to hold the costs of commodities down in Zimbabwe’s prevailing inflationary environment.

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