'Cartels controlling Zimbabwe fuel sector'

THE Zimbabwe Coalition on Debt and Development (Zimcodd) has alleged that the country's fuel sector is run by cartels that are manipulating fuel prices.

In its weekly review on socio-economic developments in the country, Zimcodd said although the Russia-Ukraine war has had repercussions on global fuel prices, in Zimbabwe there was a third force driven by "profiteering" that was influencing prices.

Zimcodd also said because the government had discovered a "cash cow" in the fuel sector it was turning a blind eye to the exorbitant
prices.

"The Zimbabwean situation is peculiar when compared to its regional peers as the increases in fuel prices are excessive. After the invasion of Ukraine, domestic prices increased astronomically ahead of other landlocked regional counterparts that are net importers like Zimbabwe. These fuel hikes are not commensurate or reflective of true global oil price dynamics," the Zimcodd report read.

According to Zimcodd, Zimbabwe's fuel sector is closed, hence the distorted pricing mechanism as major companies in the fuel import business boast a significant market share in the fuel retailing business.

"As such, the cartels, driven by a profiteering motive, can significantly influence the Zimbabwe Energy Regulatory Authority (Zera) to set a high price to take advantage of elevated global prices," Zimcodd added.

"Apart from this, the government sees the fuel sector as a cash cow as it is collecting nearly 40% per litre of fuel sold as taxes and levies. Fuel is one of the key industrial production enablers hence a high price is a hindrance to economic activity."

National Consumer Rights Association spokesperson Effie Ncube said only politically-connected cartels are engaged in price fixing, hence fuel prices are not decided by market forces.

"Unlike the prevailing regional trends, the pricing models for fuel in Zimbabwe are distorted by cartel pricing, shortages of foreign currency, the ever declining Zimbabwean currency, and all these issues have contributed to higher average fuel prices in Zimbabwe compared to countries like South Africa. The politically-connected cartels are engaged in price fixing in which fuel prices are now decided in the boardrooms of criminal enterprises, resulting in artificially-set prices," Ncube said.

He said the country's fuel regulatory framework should bring in more players to rein in the corrupt cartels.

Economist Prosper Chitambara weighed in saying: "We have been seeing fuel price hikes due to the Ukrane-Russia war, but in Zimbabwe the fuel increases are far beyond the reach of many people, hence something has to be done for our prices to be competitive."

Zera chief executive Edington Mazambani said:  "It has always been the case that prices are a little bit higher, but l don't know where the issue of cartels is coming from. We have one of most purportedly regulated fuel sectors, but we set our prices following international markets."