Paul Nyakazeya, Group Digital Editor 
BUSINESS is fretting over administered prices in the country, and especially fuel taxes, which have resulted in Zimbabwe having some of the most expensive petrol and diesel in the region.
Captains of commerce and industry who spoke to The Financial Gazette this week said Zimbabwe’s ever rising fuel prices were not only raising the cost of doing business in the country unduly, but also threatening the current relative local economic stability.
As a result, the business leaders added, the government needed to consider reducing the high taxes on fuel to avoid jeopardising the economy.
Zimbabwe National Chamber of Commerce CEO, Chris Mugaga
All this comes as there has been growing optimism among both the public and private sectors that Zimbabwe’s economy will fare much better in 2021 than in recent years — on the back of a good agricultural season and easier availability of foreign currency on the country’s auction system.
Experts say if administered prices — those determined or influenced by the government or its agencies without any reference to market forces — rise inordinately, they hurt consumers, businesses and the economy at large.
Products and services that are subject to administered prices include fuel, electricity, water, public transport costs and school fees.
The economic experts who spoke to The Financial Gazette this week said the setting of tariffs and their effect on the cost of doing business in the country was of concern to business, which is why authorities needed to reduce taxes on fuel to avoid destabilising the economy.
Zimbabwe National Chamber of Commerce (ZNCC) chief executive, Chris Mugaga, was among those who said the government was charging too much tax on fuel.
“The nature of fuel places it in the inelastic demand category of goods and the government has been making a lot of money in the process … unfortunately, this is impacting negatively on Zimbabwe’s competitiveness.
“A mere perusal of petrol prices will tell you that Zimbabwe’s fuel is on US$1,34 and our major trading partner, that is South Africa, has petrol prices at US$1,07 — Botswana is at US$0,73. Zambia is at US$0,97, with Malawi the second highest after Zimbabwe at US$1,15.
“Since the beginning of this year, Zera (the Zimbabwe Energy Regulatory Authority) has reviewed fuel prices at least three times to reflect the inflationary headwind pressures in the local fuel sector.
“These price discrepancies can attest to the fact that it is not about international oil prices, but rather individual countries’ domestic cost dynamics,” Mugaga said.
“Using any exchange rate, be it the official auction rate or black market rate … fuel prices in Zimbabwe are just too high,” he further told The Financial Gazette.
Confederation of Zimbabwe Industries (CZI) president, Henry Ruzvidzo, also warned that any further fuel price hikes would have a negative cascading effect on the cost of doing business in the country.
Henry Ruzvidzo, CZI President
“The real adjustment in the prices of fuel has an impact on the general cost of doing business. This impact will vary depending on sector activities concerned.
“The recent fuel price increase has been attributed to international commodity and shipping price movements. But the price build-up model currently employed has resulted in a regionally uncompetitive pricing situation which will threaten competitiveness of local goods,” he said.
All this follows last week’s announcement of another petrol price increase by Zera, which pushed pump prices to US$1,34 — from the previous US$1,30 per litre.
Confederation of Zimbabwe Retailers (CZR) president, Denford Mutashu, also said it was worrying that fuel price hikes had become regular, which forced businesses to respond with price increases to remain viable.
“The recent monthly fuel price hikes will be a blow to the recovery of businesses. CZR believes the prices are unjustified, especially in US$ terms, as the currency is known for value preservation.
“An increase in the price of fuel has ripple effects on the economy, as it fuels a hike in prices, at a time that the central bank is working round the clock to tame inflation,” he said.
Mutashu added that CZR feared that the latest fuel increase would further push up the cost of doing business, which would leave retailers with no option but to pass on the costs to hard-pressed consumers.
“We call upon the government to be considerate and review some of the taxes on fuel, which has made it more expensive in Zimbabwe than other regional countries,” he said.
Economist Eddie Cross also said the latest fuel price hike was likely to upset the economy, although this was unlikely to lead to higher inflation in the country.
“The main driver of the price increase is the recovery in global crude oil prices, which are now hovering at about US$70 a barrel. Fuel increases the cost of transport services and this will result in a small rise in inflation. But it is unlikely to result in a higher overall inflation rate, which is more sensitive to exchange rates.
“Any recovery in the value of the rand or the US$ is likely to have more impact,” Cross told The Financial Gazette.
Another economist, Victor Bhoroma, said the fuel tax burden on businesses was adding to the cost of doing business in the country, as it underpinned production in all economic sectors.
He said while the government was collecting the maximum possible revenues from the low hanging fruit of excise and import duties on fuel, other regional governments were looking at ways to cut taxes levied on fuel, to stimulate consumer demand and economic production.
“The current taxation levels on fuel are excessive and not in sync with trends on the African market for oil importing countries. As such, there is need to reduce import and excise duty paid on fuel to below US$0,20 per litre, carbon tax to US$0,01 and the Zinara road levy to below US$0,03 — to manage the cost of production in the economy.
“The cost of fuel heavily feeds into the cost of production across all economic sectors,” Bhoroma said.
On its part, the Zimbabwe Coalition on Debt and Development (Zimcodd) said several factors accounted for the country’s high fuel costs, especially the high duties and levies.
“In this regard, Zimbabweans have to pay for petroleum importers’ levy at US$0,05 per litre, excise at US$0,30 per litre, carbon tax, the Zinara road levy, Noczim debt redemption, strategic reserve, cost of ethanol (due to mandatory blending requirements), and dealers’ margins,” Zimcodd said.
Reserve Bank of Zimbabwe governor, John Mangudya
Zimbabwe imported fuel worth about US$560 million in 2020, down from the average of US$1,2 billion imported between 2017 and 2019 when fuel subsidies existed. It is estimated that the country has over the past few years consumed about 1,06 billion litres of diesel and 570,12 million litres of petrol per year. This translates to an average consumption of 70,2 million litres of diesel and 47,5 million litres for petrol per month.
However, local consumption has recently gone down significantly — to a level where demand has become relatively inelastic due to price increases.
This comes as there is an air of expectancy in the country that Zimbabwe’s economy is poised for further stability, with the short to medium term outlook for both the local currency and inflation largely viewed in positive light by experts.
A bullish Reserve Bank of Zimbabwe (RBZ) governor, John Mangudya, was among those who said recently that the opening of the tobacco marketing season last week would further improve forex inflows and thus, consolidate the stability of the country’s much-lauded foreign currency auction system and the economy.
