GOVERNMENT this week slashed excise duty on all fuel products in a move meant to reduce overall production costs and stabilise the country’s pricing system.
Excise duty on petrol went down from US$0,45 a litre to US$0,385 a litre, with diesel and paraffin duty now pegged at US$0,33 a litre down from US$0,40 a litre.
As a result, pump price was slashed from US$1,41 to US$1,34 for petrol, while diesel went down to US$1,23 from US$1,30.
“The reduction in excise duty will have the impact of reducing fuel prices. This will also have the effect of reducing the impact of fuel cost in the economy’s overall production cost structures across all sectors,” Permanent Secretary for Finance and Economic Development, Willard Manungo, said.
Zimbabweans expect an adjustment that will lead to a reduction in the cost of living which has risen sharply in the last few years.
Whenever international prices fell, retailers would not equally respond resulting in consumers failing to benefit from the global price decline.
For a motorist who spends an average US$180 a month on petrol, the total saving that will arise as a result of this reduction is significant, though still expensive.
The private sector applauded the move and promised to pass on the benefit to the consumer resulting in cost savings in production and distribution of basic commodities.
“The industry shall therefore incorporate this fuel price reduction into its pricing structures, which will result in the prices of basic commodities falling by ranges of one to five percent,” said Confederation of Zimbabwe Industries (CZI) in a statement.
“The overall consumer price index is therefore inclined to fall further from the 1,2 percent increment experienced over the 2016-2017 period.”
Industry said out of the 15 monitored basic commodities, the price of economy beef is expected to fall by an average 10 to 20 percent.
“In particular, the cooking oil industry shall be working with its distribution partners to ensure that the wholesale and retail markups are guided by the Manufacturers’ Recommended Prices (MRP),” said CZI.
Local fuel prices have remained higher than those in neighbouring countries, making Zimbabwe expensive as a tourist destination and its products uncompetitive in foreign markets.
According to a fuel price tracking site that looks at global petrol prices in SADC countries, the price of diesel a litre in South Africa is US$1,15, Zambia (US$1,26), Botswana (US$0,81), Mozambique (US$0,96), Malawi (US$1,13), Lesotho (US$0,77), Madagascar (US$0,99), and Mauritius (US$1,05).
In Namibia the price is US$0,95, Tanzania (US$0,91), Angola (US$0,73), Democratic Republic of Congo (US$1,08) and Swaziland (US$1,02).
For petrol, the price a litre in South Africa is US$1,13, Zambia (US$1,47), Botswana (US$0,84), Mozambique (US$1,04), Namibia (US$0,94), Tanzania (US$0,98), Angola (US$0,86), Lesotho (US$0,78), Democratic Republic of the Congo (US$1,09), Malawi (US$1,14), Swaziland (US$1,03), Mauritius (US$1,34) and Madagascar (US$1,19)
The high prices have been largely due to a plethora of taxes, which include duty, a Zimbabwe National Roads Authority (ZINARA) road levy, carbon tax, debt redemption and strategic reserve levy.
According to information obtained from the Zimbabwe Energy Regulatory Authority (ZERA), besides excise duty, there is a ZINARA levy which is charged at US$0,06 a litre for both diesel and petrol.
Carbon tax is at US$0,13 and US$0,04 a litre for diesel and petrol, respectively.
The debt redemption levy, introduced in 2006 to clear a US$170 million NOCZIM debt, is at US$0,013 and US$0,067 a litre for diesel and petrol, respectively.
The strategic reserve levy attracts a rate of US$0,015 a litre for both diesel and petrol, information from ZERA shows.
Fuel firms and importers also incur administrative costs in the form of storage and handling; clearing agency fees; and financing costs, all of which are part of a pricing structure created through Statutory Instrument 80 of 2014.
Zimbabwe’s daily consumption of fuel is four million litres a day.
The country’s roughly 1,2 million vehicles require about 1,5 billion litres of fuel a year, both diesel and petrol, to keep the wheels rolling.
Importing the fuel has, since the better part of last year, been a struggle due to shortage of foreign currency.
Fuel prices directly affect logistical costs and other business expenses.
And high production costs undermine recovery for a country like Zimbabwe trying to extricate itself from an economic crisis precipitated by low productivity and poor domestic demand due to high unemployment levels and low disposable incomes.
Other economists doubt that bus and taxi operators will respond to this call by reducing fares.