Govt fuel prices intervention stabilises prices of goods, services

FUEL is an important input for transportation and any rise in its price directly impacts not only households but businesses that rely on logistics and transportation chains around the world with a knock-on effect throughout the broader economy. Fuel prices are also responsive to the economic forces of demand and supply and are known the world over to have an effect on the prices of goods and services. They (fuel prices) are therefore an important determinant of costing on a number of products globally as they influence efficiency in the movement of goods.

Businesses are therefore responsive to the movement in the global fuel prices. In Zimbabwe as in many other countries, the rise in fuel prices has always been met with a swift increase in the prices of basic commodities and there is nothing wrong with that. It is justifiable and should be like that anywhere. It is an economic dictate where the costs are passed to the end user or the consumer so that the business remain profitable.

In cases where there is a reduction in fuel prices, economic forces also dictate that the prices of goods and services should respond with a reduction that is in tandem with the obtaining fuel price so that a semblance of economic stability is maintained but that economic principle seem not to be working in Zimbabwe.

Any fuel price increase is usually met with increased fares by transporters while supermarkets also hiked prices of basic goods with haste - some with a margin that is way above the fuel increase adding a burden to the already struggling working class and the common people.

However, a few days ago the prices were brought down courtesy of the Government intervention with ZERA announcing in a circular on Wednesday that US$ prices for petrol and diesel have dropped from $1.70 to $1.61 and $1.80 to $1.76 respectively.

In local currency, petrol will retail at $667.43 while diesel will sell at $727.69. It is our observation however that although nominal, the recent reduction in the prices of fuel has not yet been responded to by business people.

Businesses have hiked prices of goods and services on the backdrop of the rise in global fuel prices caused by a shift in supply chains as a result of the Russia – Ukraine conflict.

The Government has however, been alert and sensitive to the plight of the ordinary citizen as it completely removed levy on diesel in June and has been working to keep the fuel prices below the US$2 mark.

While we applaud the Government for its intervention, one would also have expected the business people to respond to the reduction of fuel prices with the same swiftness they responded with when the prices of fuel were hiked.

That has not been the case. And we take this opportunity to implore business people to at least follow basic business principles and to have a semblance of sincerity in their dealings.

The continued hiking of prices can no longer be justified. The intervention by the Government was done in the spirit of easing life for the majority of the country’s citizens knowing fully well the effects of fuel hike to the ordinary person.

It therefore, becomes a tragedy of the common people when the business sector decides conspire and not to follow the important economic forces that influence pricing but do as they please.

While it is appreciable that every business is there to make money, to make a profit, it is an unacceptable business practice to profiteer.

Profiteering is a practice or situation where a business seeks to make excessive, unjust or unfair profits and this has been the case in Zimbabwe where business people have been increasing prices on the basis of speculation.

Those in the retail sector and the transport business have been in the habit of unjustifiably increasing prices willy-nilly. We therefore urge the retailers not to take advantage of the consumers but to exercise restraint and complement Government efforts in cushioning the people.

The reduced fuel costs have managed to stabilise the costs of goods and services. Two drops in fuel prices since July 18, a 9 percent drop in petrol-blend prices from US$1,77/ litre to US$1,61/litre and a drop of 6,3 percent in diesel from US$1,88/litre to US$1,76/litre, have reduced transport and motoring costs in general, commuter omnibus fares on some routes, and eased pressure on prices.

This comes in the wake of serious talks between the Government and manufacturers on pricing formulas, plus some serious action by the authorities on things like pricing according to the black-market exchange rate.

The business community has applauded the Government for the double reduction saying it will reduce their transportation costs and in some cases reduce the cost of their products which they can then pass on to consumers.

Confederation of Zimbabwe Retailers president Mr Denford Mutashu told our Harare bureau: “The reduction of fuel prices by the Government is a good move which has resulted in reduced transportation cost price. We are now looking at a reduction in prices of basic goods and some other goods such as cooking oil, sugar and salt among others have their prices reduced.

“We have responded positively and fuel is one key cost driver and the Government has made sure that the price is not only reduced but the fuel is also available. It is something that has to be applauded. We have been having engagements with the Government and we applaud the move.”