Price row fuels shortages in Zimbabwe

Price row fuels shortages in Zimbabwe

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By Staff Reporter

ZIMBABWE'S government and businesses have clashed over the prices of basic commodities, now blamed for widespread shortages.

Prices shot up by as much as 100% after the March 31 elections, but the government told businesses to reverse the hikes.

Most businesses have defied the order and essential foods have disappeared from shops, but some have re-emerged on the black market.

"Increases were delayed to avoid harsh criticism of the government before the elections, but now the government is saying you cannot increase prices without consulting us... that's not what we agreed," a spokesman for the Confederation of Zimbabwe Industries said.

Industry officials said the shortages were not artificial, but production was falling because of uneconomic pricing and shortages of foreign exchange.

"(This) leads to panic and... hoarding," said the Chamber of Commerce.

Fuel queues have resurfaced around the country as it emerged Friday that Zimbabwe's fuel is grossly underpriced and government has been paying billions of dollars weekly in subsidies in a bid to suppress price increases of the commodity.

A rise in the price of fuel is considered inflationary and could negate government’s illusory economic turnaround, the weekly Zimbabwe Independent reported.

This comes as government, which is sounding increasingly desperate over the latest bout of shortages, has commissioned a consortium of local businesspeople to carry out a feasibility study to revive the ancient Feruka oil refinery in Mutare.

The Zimbabwe Independent reports that government has plans to revive the plant this year, funds permitting. But petro-chemical engineers this week said the plan was “pie in the sky” as it would be more cost-effective to build a new plant.

The government price for petrol and diesel is currently $3 600 a litre while in South Africa, the forecourt price of both petrol and diesel is around R5 a litre. This translates to $5 000 at the official rate and more than $15 000 a litre at the parallel market rate. The wholesale price of petrol in South Africa is R4,61 ($4 610 at the official rate).

Fuel merchants this week said after factoring in transport costs, fuel can be landed in Zimbabwe at around $5 000 (if forex secured at the official rate is used).

The government is therefore paying almost $1 500 to subsidise every litre of fuel sold at service stations. Zimbabwe normally consumes two million litres of fuel daily.

So skewed is the pricing structure in the country that a litre of fuel is cheaper than a bottle of mineral water ($9 000), a fizzy drink ($8 000) or a 500 ml sachet of milk ($5 000).
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