Most fuel retailers in Zimbabwe yesterday raised their prices in foreign currency on expectations that the country’s tax collector, the Zimbabwe Revenue Authority (Zimra), would charge them duty in foreign currency.
Last month, the Reserve Bank of Zimbabwe allowed fuel companies with free funds to import fuel for sale in foreign currency, in a bid to save foreign currency.
The industry regulator, the Zimbabwe Energy Regulatory Authority (ZERA) was also given exchange control approval to receive applications from fuel companies that have free funds for direct imports to be sold in hard currency.
A snap survey by this newspaper yesterday showed that the price of petrol at some of the capital’s forecourts had shot up by US$$0.07 a litre or 6% to trade at US$1.29 a litre while diesel went by US$0.10 to sell at US$1.43 per litre from around US$1.33.
Fuel prices in Zimbabwe dollar also went up yesterday.
Petrol is now retailing at ZWL$18.70 while diesel is selling at ZWL$18.66.
This is on the back of a surge yesterday in international petroleum prices.
Brent crude was up 2% at US$52.74 a barrel while the United States West Texas Intermediate crude was more than 3% higher at US$48.07 a barrel.
The situation has meant that local fuel prices have remained higher than those in neighbouring countries, making Zimbabwe expensive as a tourist destination and its products uncompetitive in foreign markets.
Petrol and diesel in Zambia, South Africa and Namibia were retailing at US$1 on average.
Fuel prices directly affect logistical costs and other business expenses.
It undermines recovery for a country like Zimbabwe battling to extricate itself from an economic crisis precipitated by low productivity and poor domestic demand due to high unemployment levels and low disposable income.
The high prices have been largely due to a plethora of taxes, which include duty, a Zimbabwe National Roads Authority road levy, carbon tax, debt redemption and strategic reserve levy.
Duty is pegged at US$0.90 and US$1.15 per litre for diesel and petrol respectively, while ZINARA levy is charged at US$0.02 per litre for diesel and US$0.06 for petrol, according to information obtained from ZERA.
Carbon tax is at US$0.01 and US$0.04 per litre for diesel and petrol respectively.
The debt redemption levy introduced in 2006 to clear a US$170m NOCZIM debt, is at US$0.01 and US$0.06 per litre for diesel and petrol respectively.
The strategic reserve levy attracts a rate of US$0.015 per litre for both diesel and petrol.
In addition, companies pay pipeline levy of US$0.11 for both diesel and petrol per litre, the information from ZERA shows.
Fuel firms and importers also incur administrative costs in the form of storage and handling; clearing agency fees and financing costs, all of which are part of a pricing structure created through Statutory Instrument 80 of 2014. Well-placed industry players who requested anonymity told Business Times yesterday that Zimra approached fuel companies recently citing the need for payment of duty in foreign currency on all direct fuel imports (DFIs).
“Zimra approached us recently citing that it was now going to charge duty in foreign currency for DFIs and this will then add about 45% of the cost component of the product.
This does not need rocket science to know what will happen to the price,” one industry source said.
Questions sent to Zimra spokesperson Francis Chimanda were not responded to at the time of going to print.
ZERA acting chief executive officer Eddington Mazambani said he was not aware of the development while Reserve Bank of Zimbabwe governor John Mangudya did not respond to questions.
Contacted for comment Zimra did not respond by the time of going to print.
The new special dispensation for fuel companies came to alleviate the fuel crisis at a time when foreign currency pricing was outlawed last year through Statutory Instrument 142 of 2019, which restored the Zimbabwe dollar after a 10-year hiatus, following the scrapping of the local unit, which had been ravaged by inflation.
And prior to the latest development, only a few designated fuel service stations could sell fuel in forex in terms of Statutory Instrument 212 of 2019, which allowed only guests of State and diplomats to buy petrol, diesel or other petroleum products in foreign currency.
These developments come on the back of a recent confirmation by the central bank boss, during the announcement of the Monetary Policy Statement (MPS) that the bank’s policy on free funds was remaining unchanged.
Free funds basically refer to foreign currency received by individuals, international organisations, non Governmental organisations (NGOs) and embassies.
The RBZ recently announced that it will be publishing on a weekly basis the status of fuel facilities available to the Oil Marketing Companies (OMs) for the procurement of fuel for sale to the public in local currency.
For the month of March 2020, RBZ released US$120 million fuel finance facilities.
Of this amount, US$18.47 million worth of Letters of Credit have been confirmed for the immediate drawing of fuel by OMs from NOIC depot in Msasa.
“Fuel being procured using free funds under the DFI facility in line with Statutory Instrument 212 of 2019 will go a long way in augmenting the availability of fuel in the country,” Mangudya said.
“The bank would, therefore, like to reassure all holders of free funds that their funds are safe and secure in Zimbabwe”.