Industry welcomes fuel duty reduction

CAPTAINS of industry have welcomed the reduction of excise duty on fuel saying this will see the pump price going down as well as reducing the cost of production in the manufacuring sector.

In the past, the industrial sector has expressed concern over the high cost of production induced by the high cost of fuel such as diesel and petrol which ultimately affected the price of goods and services.

The manufacturing sector has been facing stiff competition from imported products since the introduction of multi-currency in 2009 as a result of high production costs.

This week, the Government slashed the excise duty on fuel by about 18 percent, a situation which is  expected to have a direct impact on production costs.

According to a schedule from the Ministry of Finance and Economic Planning, excise duty on petrol has been reduced from $0.45 per litre to $0.385 per litre while duty on diesel and paraffin was revised downwards by $0.07 to $0.33 per litre.

In separate interviews, captains of industry said the downwards revision of excise duty on fuel  would see the pump price of fuel dropping and ultimately translating to a decline in the price of basic commodities.

The Confederation of Zimbabwe Industries president Mr Sifelani Jabangwe said:

"This is a welcome development because it will go a long way towards addressing the cost of doing business.

"One of the components that we have highlighted is the cost of fuel in the country.

"Many of our members use fuel in distribution; some use it in the production of goods or services as an energy source.

"The fuel component feeds directly into the cost of doing business and as such, any reduction is a welcome relief.

"We expect to see companies now starting to factor the cost of their finished products mirroring reduced fuel prices."

Association for Businesses in Zimbabwe chief executive Mr Victor Nyoni echoed similar sentiments adding that there was a need for further reduction on fuel excise duty for its impact to be significantly felt.

"What the Government has done is commendable but there is still belief that the reduction is somewhat very low.

"This means the price of fuel will still be high compared to other countries in the region.

"Nonetheless, the approach is very good, we believe that the Government's intention is to reduce industry's production costs which is a positive move," he said.

The Zimbabwe National Chamber of Commerce past president Mr Luxon Zembe said the development should also translate into reduced prices of basic commodities.

"We should be able to see a corresponding reduction and stabilisation of prices of basic commodities. What is important is for the whole value chain to also respond to this reduction in excise duty in order to benefit the end user," he said.

Recently, there has been a public outcry over the cost of fuel locally, with legislators urging the Government to reduce taxes on fuel in order for fuel prices to match regional prices.

In the past three months, prices of basic commodities have skyrocketed to alarming levels in some instances increasing by as much as 200 percent.

The price hikes were triggered by some irresponsible social media reports suggesting that the country would face food shortages.

This has also seen Zimbabwe's year-on-year inflation rate closing 2017 at 3.46 percent gaining 0.49 percentage points on the November rate of 2.97 percent.

In the 2018 national budget, Finance and Economic Planning Minister Patrick Chinamasa said on the outlook, the biggest threat emanates from inflationary pressures the economy faces from potential general price hikes driven by speculative tendencies arising from the mis-match between electronic bank balances and available foreign exchange.