Business leaders raise redflag to Govt

LIVINGSTONE MARUFU

Business leaders have warned Government saying the administration should cut fuel taxes as global oil volatility continues to cascade through the domestic economy.

Captains of industry are pushing for a hard ceiling on fuel taxes and levies, proposing a cap of US$0.40 per litre to act as an automatic stabiliser during global price shocks and to shield businesses and consumers from relentless cost escalation.

The call comes amid a sharp surge in pump prices, with petrol rising to US$2.23 per litre from US$1.71 in just weeks, while diesel has climbed to US$2.11 from US$1.76 over the same period.

The increases, three in just 30 days, underscore the vulnerability of Zimbabwe’s pricing model to external shocks.

At the heart of the crisis is the country’s heavy tax regime on fuel, which accounts for nearly a third of the pump price and is now being blamed for magnifying inflationary pressures across the economy.

In submissions to the Ministry of Industry and Commerce, the Zimbabwe National Chamber of Commerce (ZNCC) said the absence of a structured fuel pricing framework was exposing the economy to avoidable shocks.

“We recommend that the government should introduce a tax ceiling on fuel where authorities cap total taxes and levies at US$0.40 per litre,” ZNCC said.

“This creates an automatic stabiliser during global price spikes and prevents excessive pass-through to the economy.”

The business lobby also urged authorities to adopt a fuel price smoothing mechanism, leveraging strategic reserves to moderate short-term volatility and transitioning from pure spot pricing to blended pricing models.

Available data shows that, prior to recent temporary adjustments, taxes and levies accounted for approximately US$0.63 per litre for petrol and US$0.57 per litre for diesel, among the highest in the region.

This tax burden has had a compounding effect, not only does it push up pump prices, but it also amplifies production costs across key sectors, from manufacturing to transport, feeding directly into inflation.

Compared to regional peers such as Botswana and Zambia, Zimbabwe extracts significantly higher taxes per litre, an imbalance driven less by logistics and more by the structure and layering of fiscal charges.

Even after government interventions, key taxes, including excise duty, carbon tax, and the strategic reserve levy, remain firmly embedded in the pricing model.

Authorities have attempted to cushion consumers through selective, time-bound tax relief.

According to the Zimbabwe Energy Regulatory Authority (ZERA), the government removed taxes worth about US$0.54 per litre on diesel, preventing prices from surging beyond US$2.65 per litre and instead capping them around US$2.11.

Yet, despite these measures, price increases have persisted, highlighting the limits of short-term interventions in the face of sustained global volatility.

Petrol prices, in particular, have remained elevated above US$2.20 per litre, largely due to the continued weight of taxation.

The government has acknowledged that the ongoing geopolitical tensions in the Middle East are exacerbating fuel supply disruptions and price instability.

Cabinet recently approved a review of selected fuel taxes following a report presented by the Minister of Industry and Commerce on the crisis’ impact on basic commodity pricing.

Information, Publicity and Broadcasting Services Minister Zhemu Soda said further refinements are underway, with new pricing adjustments expected to be announced.

Beyond tax policy, authorities are exploring structural reforms to reduce dependence on imported fuel.

A key plank of this strategy is increasing ethanol blending from E5 to E20, a move projected by industry players to cut petrol prices by approximately US$0.18 per litre, offering meaningful relief to both motorists and businesses.

The shift, if implemented effectively, could ease demand for imported fuel while cushioning the economy from external shocks.

For businesses already grappling with currency instability, high borrowing costs, and subdued demand, fuel prices have become a critical pressure point.

With transport and logistics costs feeding into nearly every sector, the current trajectory risks triggering a broader cost-push inflation cycle, undermining competitiveness and slowing economic recovery.