Fuel price hike: People say 'no'

HARARE - Economists have warned that the imminent hike in the price of fuel will trigger the rise in prices of basic commodities, transport and a catastrophic increase in the cost of living.

The inflationary pressures on the already battered Zimbabwean economy resulting from a possible increase in the price of fuel will worsen anger, anguish and the suffering among the people.

This comes as government last week gazetted new pricing regulations under Statutory Instrument 80 of 2014, crafted by the Energy ministry in consultation with the Zimbabwe Energy Regulatory Authority (Zera).

The regulations state that the selling price of any petroleum product shall not exceed seven per centum of the oil company’s purchase price.

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 service stations are selling it at $1,38, giving them a profit margin of 4 percent.

Based on the new regulations, fuel dealers now have a legal leeway to increase the price by 3 percent.

Renowned economist Eric Bloch said the pricing regulations were in view of government’s critical need to improve its inadequate revenues, but said the counter-balancing negative is that they are likely to cause inflationary consequences.

“It will inevitably cause a rise in passenger transport costs and, on the other hand, it will result in increased costs of input procurement for industry, and of delivery of finished products to distributive outlets, with consequential increase in prices of goods sold to consumers,” Bloch told the Daily News.

“This is the wrong time for government to do it and in trying to raise cash, they may actually create more problems than solutions resulting in pulling the economy back, instead of pushing it forward.”

He said the best way forward for government was to realise increased revenue to fund various expenditures.

Economic analyst Kipson Gundani noted that government’s intervention was not in the best interest of the economy and that market forces must be allowed to set the price equilibrium.

“Government intervention is not good for the economy as it creates market distortions. Any form of regulation in the fuel price will have an economic ripple effect downstream,” Gundani warned.

Independent economist John Robertson said it was not clear whether the change in calculating the profit margins by suppliers and retailers would have a major impact.

“At this stage it is very unclear,” Robertson said.

“If there is going to be an increase, it will be by a very few cents and this will result in a modest change in pricing structures.

“A major impact is likely to be felt if, for instance Ukraine goes to war and triggers global politics, this will affect global oil prices which in turn negatively impact on our local fuel prices and will be felt by every country.”

Motorists also expressed disappointment at the move, saying government has given fuel dealers the leeway to hike prices.

Solomon Ngwena, a Harare-based motorist, told the Daily News:  “The economy is already struggling and we cannot afford to foot government expenditure. Government should protect us. As a motorist, I feel disappointed that government approved such a regime. It is just unacceptable.”

Taxi drivers complained that prevailing economic conditions do not allow them to operate profitably and the imminent hike will collapse their businesses.

“Nhasi zuva rese ndashanda $3, kana government ikasiya nyika ichifumuka kudai tinenge takutoita community serviceka? (The whole day I worked for $3, and if we leave government to let prices continue going up, then we will be doing community service). This cab is my own, but still the economy has not been merciful.”

Robert Chivese, another Harare-based cab driver.said: “If this fuel hike goes on, it will show that government does not care for its already suffering people.”

Innocent Zikhali, another motorist, told the Daily News that government needs to come up with an initiative to cushion motorists.

“Government needs to subsidise this hike; everyone knows that times are tough. Companies have shut down, people have been retrenched; what is next?” asked Zikhali.

Arnold Chimbambo, a motorist, expressed fears of fuel hoarding and shortages.

“Mukuona my sister, matonyora madhiri ekuti ichakwira, ma servas vachatanga kushiridha fuel (You see my sister, you have already written about this hike, service stations will horde fuel in anticipation of the hike). Just give them two days. They will start withholding fuel wanting to sell at the new price,” Chimbambo said.

The Government Gazette further explains that the maximum wholesale and retail pump price of petroleum at a wholesale depot shall be determined in accordance with the seven per centum regime.

The Daily News heard that there were representations made to government yesterday against the hike, warning that the increase could provide tinder to crystallise anger against government what with the backdrop of increasing hardships.

Comments (14)

“This is the wrong time for government to do it and in trying to raise cash, they may actually create more problems than solutions resulting in pulling the economy back, instead of pushing it forward.” Did i not say say this yesterday? someone in the goverment should really think about this

KayCee - 15 May 2014

“This is the wrong time for government to do it and in trying to raise cash, they may actually create more problems than solutions resulting in pulling the economy back, instead of pushing it forward.” Did i not say say this yesterday? someone in the goverment should really think about this

KayCee - 15 May 2014

And what about the ethanol project, of which the local fuel price is twice as much as anywhere in the world? Honestly speaking, this is corruption at its worst.

reason - 15 May 2014

Zanu Pf hamuna Game, why cant you quit for the sake of the future of Zimbabwe. With Mugabe with one eye kkkkkkkkkkkkkk an old fool, how can we be lead by a killer, wife snatcher, duzvi ya President

George - 15 May 2014

ZANU PF does not care about the people because we did not vote for them on July 31,2013. It is clear they owe their election victory to rigging. Come sugar,come salt,ZANU PF has lost touch with the people & they don't care at all.

GUNGUWO - 15 May 2014

They should also remove this mandatory blending of fuels that is leaving paying a very high price for a substandard product. We want the normal blend of fuel. Who did they consult when they made it mandatory to blend? We the citizens will be voting soon. 2018 hakusi kure

Samanyanga - 15 May 2014

The fuel price is too expensive in Zimbabwe. In SA fuel pricing is complex and has a lot of levies but it is R1 cheaper than what we are paying. If the government could enter into reasonable contracts with big fuel suppliers, the price that we pay would be cheaper than in SA. Where is the benefit of blending, really?

Observer - 16 May 2014

The people in government never learn from their past mistakes. When Masimirembwa's programme effected price regulations around 2007, what was the end result? Was is positive or was it negative?

Dr Know - 16 May 2014

... Are you having a problem with your borehole or planning to have one. We sell submersible borehole pumps, motors and control boxes. Good brands. repairs and installations . call 0714247097 email. boreholepumps@yahoo.com

Pumps - 16 May 2014

You are correct mr observer, fuel in zimbabwe is already above what other countries charge. Hiking fuel prices will be a havoc.

MOYO - 16 May 2014

things are hard gentlemen but kutukana hakuna kunaka. fuel ngaisakwira nekuti tanzwa vakomana.

the patriot - 16 May 2014

This is needless speculation AGAIN by Daily News. Retailers have had option of up to 5% but many have been operating around 3-4% and due to viability issues they have been lobbying gvt to raise it to 6-7% since 2012(with PM Tsvangi,Mangoma&Biti)......this increase to 7% is meant to help viability of retailers and indeed most will operate around 6% a 2% increase which will see(if any) increase in fuel by 3 cents.......I highly doubt 3 cents a litre more for fuel is "Disastrous" for the economy.......Daily News itai mushe why do you wish misery on Zimbos just because they didn't vote for Tsvangirayi and those that did now want him out????

wezhira wezhara - 16 May 2014

Post a comment

Readers are kindly requested to refrain from using abusive, vulgar, racist, tribalistic, sexist, discriminatory and hurtful language when posting their comments on the Daily News website.
Those who transgress this civilised etiquette will be barred from contributing to our online discussions.
- Editor

Your email address will not be shared.