eBusiness Weekly
Golden Sibanda
Finance and Economic Development Minister Mthuli Ncube says registered tax compliant businesses must take advantage of the fuel rebate Government has put in place to avoid prices increases due to high cost of fuel after last month’s price adjustment.
The Treasury chief said it was unfortunate some companies were not keen on taking advantage of the rebate put in place for fuel consumed on productive activities.
Minister Ncube said the firms’ reluctance was evidenced by wanton increases in prices of goods and services in violation of standing rules for accessing the rebate.
Registered tax compliant business must not have increased prices relative to new fuel prices. The fuel rebate is calculated as the difference between the old excise duty on both diesel and petrol and new excise duty thresholds announced last month.
At the time the fuel prices were increased in terms of the Customs and Excise Act, Government raised duty on petrol to $2,31 per litre and on diesel fuel to $2,05 per litre.
Previously excise duty on diesel was 40 cents per litre while for petrol was 44 cents per litre. The rebate only applies to manufacturing, agriculture, mining and transport sectors.
Government introduced the fuel rebate facility to avoid fuel cost driven prices increases after it doubled the prices of diesel and petrol to plug arbitrage driven demand.
President Mnangagwa announced higher retail prices of fuel, which went up to $3,31/litre of petrol from 1,34 previously and to $3,11/litre of diesel from an average of $1,49.
Arbitrage had spawned sudden and huge demand for fuel, making it difficult for Government to mobilise the kind of foreign currency resources needed to import the fuel.
The demand was partially artificial-due to the currency issues in the country-which saw people hoarding fuel and using different approved means of local payment.
The fuel was then resold at higher prices or in hard currency on black markets in or outside Zimbabwe, where fuel prices were much higher in US dollar equivalents.
Presenting the 2019 Budget in November last year Minister Ncube said arbitrage opportunities were partly to blame for the increase in fuel imports, which reached US$1,3 billion by October.
It is against this background that Minister Ncube said the rebate was meant to keep prices in check with Zimra tasked to devise the mechanism for its implementation.
“The thing (about the fuel rebate system) is that, we put it in place so that companies then do not have to increase the price of their final products because fuel has gone up, because we said that let’s subsidise the fuel cost within the production line,” he said.
“So it’s still up to the companies to take advantage of that but we are aware that some companies are not taking advantage of it, they are pushing up prices when they could in fact access funds from the Government to bring down prices and this is unfortunate.
“So in terms of how it works, Zimra has gazetted the mechanism for access. They put out an advert, they have also invited companies to approach them to explain to how this is used, they should do that, it is their job. We encourage productive users of fuel to approach Zimra and get a rebate,” Minister Ncube said.
Addressing international in Russia during his tour of Eurasia last month, President Mnangagwa said the prior lower prices of petroleum products had made Zimbabwe attractive to external consumers who flocked into the country to buy petrol and diesel cheaply.
President Mnangagwa said black market currency dealings had contributed to a gross distortion of the fuel price, making it the lowest in the region. The black market for hard currency in Zimbabwe started after the country started experiencing shortages of US dollars.
At a time the country is battling to rebuild its depleted economy, Zimbabwe is presently unable to generate enough foreign currency to whet its huge appetite for imports.
This comes as industry’s production capacity is constrained by years of little to no investment.
While the Government maintained its policy of a 1-1 exchange parity between the US dollar and surrogate currency, Bond notes, opportunists hoarded fuel using Bond notes/RTGS and resell in hard currency or at US dollar black market rate linked prices.
Prior to adjusting the prices of petrol and diesel, it effectively meant Zimbabwe was selling fuel at subsidised prices of US40 to 45 cents, using the Old Mutual implied exchange rate, making the country’s fuel gross cheaper than the rest of the region.
