HomeBusiness DigestGovt Levies Create Fuel Crisis — NECF

Govt Levies Create Fuel Crisis — NECF

ZIMBABWE will face a fuel crisis in the near future if the government fails to review downwards a raft of taxes introduced in January, an economic think tank has warned.

The National Economic Consultative Forum (NECF) taskforce on energy in a report this month said the introduction of the levies had resulted in reduced inflows into the country of petroleum products.  

Due to the high import duty, the task force said, at one time at least 80 fuel tankers were stuck at the Beitbridge border with South Africa.

The introduction of the taxes resulted in the price of petrol and diesel going up to as much as US$1,20 from as low as US$0,70 in December.

Because of the new tax regime, fuel retailers were getting profit margins below US$0,10 a litre.

“Most of the oil companies have, in a space of 14 days, lost their credit lines and are technically bankrupt due to the new tax regime,” read the NECF report.

Under the fuel tax regimes, the compound tax level is 60% spread among Zimra, Environmental Management Agency, Reserve Bank of Zimbabwe, City of Harare and Zimbabwe National Road Authority.
Government levies US$0,22 for every litre of petroleum sold.

This, analysts warned, could stifle plans to resuscitate the depressed manufacturing industry.

“The result is less and less fuel coming into the country. Currently, there are about 80 fuel tanker trucks stuck at Beitbridge border post after oil companies failed to raise US$9 500 required for duty purposes by Zimbabwe Revenue Authority (Zimra) and National Oil Company of Zimbabwe (Noczim).”

The whole productive sector, the report warned, would be “affected negatively and the prices of goods and services are going to go up rapidly as retailers and other service providers pass on the extra cost to the consumers” despite a temporary government waiver exempting importers from paying duty on food commodities.

“This is going to be even more felt when farmers start buying inputs in preparation for the next agricultural season. Even their produce may actually end up being much higher than imported food due to the fuel factor,” read the report.

The taskforce however recommended that government would require a “more rational approach” in addressing the impending crisis despite its urgent need to replenish dried-up revenue coffers.

“On the fuel tax regime, it would be more prudent to  reduce the duties from the present high levels of US$220/cubic metre to US$80/cubic metre to enable an incremental system of US$20/cubic metre every third month for the next twelve months,” recommended the NECF.

This according to the taskforce, would provide oil companies time to “re-align their systems” to the new tax regime while improving fuel supplies.

The taskforces also said delays in establishing a joint Zimbabwe-Iran US$200 million petroleum refinery earmarked for Beira could affect future oil supplies.

The report recommended that government should partner with Mozambique, which also mooted plans of building an oil refinery.

The NECF also criticised exorbitant levies charged by public utilities after government said they should charge “viable tariffs” in hard currency.

“It has been noted that the country is now being faced with the ugly face of uncontrolled de-regulation where high levies are being charged across the board with utilities the biggest culprits,” the report stated.

The NECF taskforce meets regularly to assess the country’s energy sector, which includes underutilised fossil fuels, bio-fuel and energy generation.


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