Martin Kadzere — Government intends to directly procure fuel for its own use and key economic sectors to lower costs and boost competitiveness, Energy and Power Development Minister July Moyo has said.
Speaking at the National Competitiveness Commission (NCC) inaugural competitiveness summit in Bulawayo on Wednesday, Minister Moyo said the move would ensure stable supply and affordability.
He raised concerns about the competitiveness of the fuel procurement system.
Zimbabwe's fuel cost build-up comprises several components that determine the final pump price.
These include the international raw fuel cost (FOB), transportation costs, exchange rate between the US dollar and local currency, taxes and levies, blending costs and distributor margins.
The Zimbabwe Energy Regulatory Authority (ZERA) considers all these factors when setting retail prices. Price fluctuations are primarily driven by global oil prices and exchange rate volatility.
Minister Moyo acknowledged that while Zimbabwe cannot control external factors affecting fuel prices, the Government will focus on internal factors.
These include import duties and transportation costs.
The minister said the price of fuel at the port of discharge when compared to regional countries was significantly higher.
Fuel costs are a major expense, and their relatively high prices compared to regional countries disadvantage local products. This makes domestically produced goods more expensive, impacting their competitiveness both at home and abroad.
While acknowledging the role of the existing fuel importers, Minister Moyo said the Government's goal was to provide "predictable" and competitively priced fuel to economic enablers to operate more efficiently.
"We analyse and say, are we as competitive as Zimbabwe among those who we trade with?" he said. "When we look at ourselves here in the region, I think we are very expensive.
"So, the Government is looking at all this, and as I said, we applaud those who are delivering fuel into our country.
"But as Government, we have made some strides now...both the Minister of Finance (Professor Mthuli Ncube) and I have been directed to make sure that we buy fuel for Government use and for other enablers of the economy, because Government is there to enable the economy ...to do well.
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"We have been directed to make sure that on the Government side and in any way, we should buy our fuel competitively because we used to do that so that we don't buy spot purchases on the international market, as the other 10 (traders) are doing.
"The other 10, we think they are doing very well, but as Government . . . to compete, we should discuss with them," Minister Moyo added.
The Minister pointed to successful models in regional countries like Mozambique, Zambia, and Tanzania, where fuel traders collaborate with their governments to achieve competitive pricing.
He explained that while these countries have found effective ways to work with existing traders, Zimbabwe's current strategy involved direct Government procurement to drive down fuel costs.
"Mozambique has fuel traders, Zambia has fuel traders, Tanzania has fuel traders, but working with the Government, they have found a way of buying competitively," said Minister Moyo.
"But for now, we want the Government (to) directly buy competitively, so that we can reduce the cost of fuel in the country, which impacts on your competitiveness."
The Zimbabwe Energy Regulatory Authority (ZERA) has set the February maximum fuel prices at US$1,58 or ZiG 41,58 per litre for diesel, and US$1,53 or ZiG 40,50 per litre for blended petrol (E15).
In February, Zambia's Energy Regulation Board (ERB) set the price of petrol at US$1,24 per litre and diesel at US$1,16 per litre.
Minister Moyo applauded existing fuel traders for maintaining a stable fuel supply despite challenges and assured the public that current fuel reserves, including supplies at ports and in pipelines, are sufficient.
However, he reiterated that the Government's focus was now on improving the competitiveness of fuel procurement to lower costs.
