The war in Ukraine has exposed what we already knew. Zimbabwe’s fuel prices are a bit on the high side thanks mostly to high government taxes and levies on fuel. It’s not clear just how big these line items are at the moment but back in 2020 when the government published the detailed cost build up on fuel taxes and levies constituted a shocking 37% part of the final fuel price. Now following public outcry ZERA has published a statement defending its pricing structure.
The Zimbabwe Energy Regulatory Authority (ZERA) will continue to monitor the fuel prices in the market and provide regular updates. The fuel prices continued to increase during the past week.
Pump prices were supposed to increase but after consultations with the government and industry, it was agreed to maintain the current prices while monitoring market developments.
The public and operators are advised that the blending ratio remains at EO. Operators may sell petroleum products below the prescribed prices depending on their trading advantages and should display prices in a prominent place as provided for by the fuel pricing regulations.ZERA’s statement on Twitter
Zimbabwean fuel is too expensive period
If you just take a cursory look at this statement you too would be inclined to side with ZERA and the government. After all, there is indeed talk about how global fuel prices are on an upward trend thanks to the war in Ukraine and Western sanctions on Russia-the fog of war. The thing is you would be wrong to think that’s the only real issue here. The surge in global fuel prices has just exposed a known injustice. Zimbabwean fuel prices are on the high side putting the whole country at a disadvantage in terms of competitive advantage in the whole region.
Just to give you a taste here are comparisons:
|Country||Petrol Price in USD/Litre||Diesel Prices in USD/Litre|
Yes, these are current prices. In fact, a lot of service stations have already started exploiting motorists by charging well above the ZERA mark. So for ZERA to make it sound like Zimbabwean fuel prices are cheap is disingenuous of them. Fuel is expensive in Zimbabwe. While we cannot certain compare our prices to those of Angola (fuel is produced locally), Mozambique(they have an extensive port) we can compare ourselves to Zambia a fellow landlocked country.
Remember we said that levies make up about 30+% of fuel costs in Zimbabwe? If we factor these in Zimbabwean fuel prices go down to around US$1.08 i.e Botswana, Mozambique price levels. Which begs the question, given the importance of fuel prices in an economy, why is the Zimbabwean government not doing what’s right in this case? They already waste resources subsidising farmers every year and putting a burden on the fiscus. An intervention of this sort would be beneficial to the entire economy, rein in inflation and perhaps even boost productivity.
The only reason I can think of is that the government’s current crop of MInisters don’t yet fully appreciate that these price increases are massive shocks whose effect will reverberate throughout the economy unless they are properly managed. The government is being its usual lazy self and trying to let businesses fend for themselves in other misguided acts of shirking fiscal duty dressed up as principled capitalism. We have seen this countless times, whenever the government doesn’t want to do something expensive that takes money from the coffers they start to pretend they are principled capitalists even when intervention is needed and the best course of action.