Fuel prices to go up

Cash-strapped Zimbabweans should brace for an imminent fuel hike after government gazetted new pricing regulations.

Statutory Instrument 80 of 2014, crafted by the Energy ministry in consultation with the Zimbabwe Energy Regulatory Authority (Zera) is expected to drive fuel prices up, which in turn will have a domino effect on the pricing of various commodities.

"The selling price by a petroleum company on any petroleum product shall not exceed oil company purchase price plus seven per centum of the oil company purchase price," the government gazette reads.

"The price should also be a minimum of six United States cents ($0,06) for every litre or a maximum of seven per centum of the oil company's selling price, in the case of the retail outlet."

Currently fuel retailers are buying  petrol at $1,44 from suppliers. Although they are supposed to sell petrol at $1,49, they are retailing it at $1,50.

Diesel is being procured at $1,33 but garages are selling it at $1,38, giving them a profit margin of four percent.

Based on the new regulations, fuel dealers now have a legal leeway to explore the remaining three percent from the current four percent.

The government gazette further explains the maximum wholesale and retail pump prices of petroleum at a wholesale depot shall be determined in accordance with the seven per centum regimes.

Efforts to get a comment from Zera on the new regulations were futile as questions sent to the authority remained unanswered at the  time of going to Press last night.

Analysts warn that motorists will be forced to pay more for fuel, leaving cash-poor Zimbabweans worse off given that any fuel price increase drives up the cost of other commodities.

Economist Takunda Mugaga said the decision will have a detrimental impact on the current economic situation.

"It is highly possible the dealers will exploit this opportunity… This decision will reverse the deflationary trend currently being enjoyed by the country," Mugaga said.

He said the move will affect both the domestic and corporate sectors as fuel drives both spheres.

"As you know most companies and households now run on generators, this will obviously affect them. It is also given that if fuel dealers decide to manipulate this loophole, the prices will start spiralling up," the analyst said.

Industry players have already warned government over challenges posed by the current operating environment.

"This move by government is potentially fatal as it will increase the production costs in the country, which are already high," Mugaga added.

"The increased price levels may lead to more retrenchments as companies struggle to meet operational costs, thereby increasing the already high unemployment levels in the country."

The last time fuel prices went up was in July 2013 after Zimbabwe's general election which gave a resounding victory to President Robert Mugabe albeit under controversial circumstances.

The country saw a marginal $0,04 increase after prices went down by at least $0,10 in May the same year.

In March last year, government hiked fuel prices to raise cash for elections; a move which saw a price spiral in basic commodities.

Broke and failing to raise money from the international community, coalition partners at the time agreed that Zimbabweans will have to dig deeper into their pockets to bankroll the elections, with government increasing excise duty on fuel by at least 20 percent, a cost that was  passed on to consumers by suppliers.

The imminent hike is likely to be passed on to consumers as well, analysts warn.