It seems the election season and the political courting that comes with it is well and truly over. Now we are back to our normal and dreary lives where the main act is trying to survive. Yesterday the Zimbabwe Energy Regulatory Authority (ZERA) introduced fuel price caps for the month of September 2023. The headliner is that Diesel will now be selling for US$1.76 per litre while petrol will be selling for US$1.65 per litre. These hikes will have a serious impact on the economy particularly inflation.
Before the hike:
- Diesel was selling for the price of US$1.65 per litre
- Petrol was selling for US$1.61 per litre
- LP gas which is used extensively these days thanks to continuing power custs will now be selling at US$1.60 per kg up from US$1.49
Zimbabwean fuel remains very expensive compared to other countries in the region. Even Zambia which is further inland compared to us has cheaper fuel.
| Country | Diesel Price (USD) | Petrol Price (USD) |
|---|---|---|
| South Africa | $1.22 | $1.28 |
| Botswana | $1.06 | $1.08 |
| Zambia | $1.41 | $1.42 |
| Zimbabwe | $1.76 | $1.65 |
Based on the above no matter how you look at it, Zimbawean fuel prices are quite steep. This increases the cost of manufacturing goods in the country making our products uncompetitive in the region. It explains why the local industry is always under threat from foreign products which tend to be much cheaper.
Diesel and petrol are a cost driver as the country is landlocked. A massive hike in fuel prices like this will reverberate throughout the economy. Moresore given the fact that fuel is not only used in transportation but as an energy source. ZESA has constantly failed to generate enough electricity for these past couple of years. Businesses often have to rely on diesel/petrol generators to power their way through loadshedding.
How fuel pricing works in Zimbabwe
Like in most SADC countries, the fuel industry is oligopolistic i.e. it is dominated by a few large players. To protect consumers the Zimbabwean Energy Regulatory Authority (ZERA) sets a price cap at the start of each month. While they set prices in USD and ZWL, it’s extremely rare to find fuel for sell in ZWL in Zimbabwe so there is often no pressing need to adjust the ZWL price even when rates change.
Generally the fuel sellers in Zimbabwe often adopt the price cap especially for service stations along busy roads. This means that while technically that US$1.76 per litre is not the set price for diesel but merely a price cap you can bet that most fuel companies will be selling their diesel at or close to that price.
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