ZIMBABWEANS are bracing themselves for a significant increase in fuel prices following an 83% increase in duty on unleaded petrol, a move that has sparked fears of widespread price increases across the value chain.
This hike, described by industry experts as “atrocious” and “shocking”, comes barely a week after the government also imposed a US$0,005 per litre fuel levy, setting off concerns of ripple effects across the economy.
Direct Fuel Imports (DFI), the industry body representing petroleum importers, confirmed that the additional cost would be passed on to consumers.
Prior to the levy, a litre of petrol and diesel was priced at US$1,49 and US$1,50, respectively. With the new duty on unleaded petrol, the prices are expected to go up substantially.
While the levy may support government projects, industry leaders fear consumers would bear the brunt.
According to Statutory Instrument (SI) 162 of 2024, the government hiked duty on unleaded petrol from US$0,30 to US$0,55.
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“With regards to the increase of duties on (unleaded) petrol from 30 cents to 55 cents, that is about 83%. It was done under Statutory Instrument 162,” DFI secretary general Bart Mukucha told the Independent this week.
“What prompted it to increase was obviously the government's desire for increased revenues, but we think that the increase is atrocious. It is shocking.
“We cannot understand why. You are going to find people parking cars at home, maybe opting for public transport because it is just so expensive now.”
He said the adverse impact of the legislation would become more pronounced when the legal instrument is fully rolled out.
“But now, it looks like the increase is not yet in full force, which is why the blended petrol is still cheap. I do not know if these are old stocks or if there is something wrong with the pricing coming out of some authorities like Zera (Zimbabwe Energy Regulatory Authority),” Mukucha said.
“We are trying to find out why the blend is still cheaper because it is not making sense at all. Why should blended petrol be cheaper when unleaded petrol is that much more expensive?”
Zera chief executive officer Edington Mazambani told the Independent that the duty increase was not a blanket hike, but rather specifically targeted unleaded petrol.
“Changes on duty have no bearing on fuel supply as it is passed on to customers. Duty on petrol was not increased by 83% across the board, but there is SI 162 of 2024 which introduced additional duty on specific petrol not on blended petrol,” he said.
Mazambani said the country imports about 130 million litres of combined diesel and petrol per month, enough to meet national demand.
The violence, which led to South Africa closing a major border crossing, could impact Zimbabwe's fuel supply chain, dependent on the Feruka pipeline from Beira.
"It could be due to logistical challenges on the part of those that were visited. Otherwise, the country is not experiencing any shortage and is not expecting any shortages in the market," Mazambani pointed out.
He also said fuel smuggling has been rampant in the country, adding that law enforcement has been alerted about the scourge.
"Fuel smuggling is a challenge in the country and within the region. Zera is part of a regional initiative to curb fuel smuggling. Law enforcement agencies have been alerted about this scourge."
In a bid to curb fuel smuggling, Finance, Economic Development and Investment Promotion minister Mthuli Ncube announced in his 2024 Mid-Term Budget Review that all fuel imports — including petrol, diesel, paraffin, and jet A1 — via road would require payment of duty and levies upon entry, effective August 10, 2024.
The duty and levies will be refunded at the port of exit, provided all transit procedures are followed and proof of export is submitted.
However, according to Knight Silumesi, an ex-Puma executive and oil marketing consultant, this move has led oil transporters to avoid the Zimbabwe route, resulting in lost revenue for the country.
“The rate of the duty is astronomical from the Zambian truckers’ point of view, but they say it's a duty you pay when transiting in and can be claimed back when transmitting out, but the drivers who have tried to pay this duty are saying it’s practically difficult to claim back,” he was quoted as saying by Zambian Business Times.
The Parliamentary Committee on Budget also criticised the policy, labelling it as “laborious” and of limited benefit.
Meanwhile, National Oil Infrastructure Company (Noic) chief executive officer Wilfred Matukeni said pumping capacity had increased from 2,1 billion litres to 3 billion litres per year.
“There has been an increase in the year-to-date volume pumped from 1,675 billion litres in 2023 to 1,890 billion litres this year with a projection of 2,3 billion litres to year end,” he said.
“There has also been a significant increase in the consumption of fuel during this year.”
According to Noic, current supplies are adequate to meet local demand.
"Fuel collections from the companies’ depots have increased from 177 million litres in September to 197 million litres in October 2024,” Matukeni said.
“The supply of fuel to service stations is dependent on the respective oil companies’ logistical arrangements. Current supply is adequate to meet local demand.”