Source: The far reaching effects of fuel price increases | Newsday (News)

Every driver’s nightmare has become securing fuel and getting it at an affordable price.

Remember the days of parity with the US dollar, when fuel was at USD$1.36 for petrol &USD$1.25 for diesel? Fuel companies could easily buy and trade fuel without much intervention from the central bank as it was economic to do business.

The introduction of the bond note which created a parallel market for trading forex meant loss of value for the local counter.

The disparity continued with government trying to subsidise fuel and keep the pricing at parity with a fictional assertion that the USD was equal to surrogate bond note currency.

It was not long until in February that the government accepted reality and increased the price of fuel to ZWL$3.41 for petrol & diesel ZWL$3.31 per litre and the slide into hyperinflation was accelerated. Soon several increases have seen the price rising to ZWL$7.47 for petrol & ZWL$7.26 per litre.

The ordinary driver has been left gnashing his teeth with a possibility of another increase within a weeks’ time.

On the flip of the coin, Zimbabwe companies have felt the pinch. The fuel industry is not only left with the burden to satisfy above normal demand as panic is causing drivers to stock fuel due to speculation over possible price increases but additional demand to cover electricity supply gaps.

Due to the intense load shedding lasting on average 18hrs a day in most areas, most business are forced to run on generators for long hours and hence increased demand for fuel to power the generators. With the price of fuel continuously sky rocketing, businesses find themselves in a fix as cost of production keeps rising.

The unfortunate bit is that pricing remains suppressed either by regulation or stunted demand. This means viability of businesses is adversely affected by these circumstances & companies are left with no choice but either reduce working hours or stop operating during load shedding.

The backlash from customers was immense due to lack of appreciation at times to the impact on business for variables beyond their control.

Supermarkets such as Pick n Pay & OK have also been affected as most of their perishables are heavily dependent on power to keep cold rooms, refrigerators and other equipment running. Some of their branches now close earlier than normal and others do not operate on specific days sacrificing more in fuel to provide basic services barely at cost.

One of the most hit industries is telecoms companies, a study of the sector revealed that Econet, the biggest operator, needs a million litres of diesel to power over 1,300 base stations that have diesel generator back up plan in case of load shedding.

This amounts to ZWL$15 million dollars per month when costs of transportation to sites is added to the pump price.

In simple terms the last increase in diesel price meant an additional ZWL$2.2 million direct increase to operating costs of the business. The company has been forced to cut off sites during load shedding or subsidize 50% of the down time to keep afloat.

The danger for such companies is ending up having to switch off the network when there is no power since they cannot adjust their prices due to tight price regulation in the industry.

Unfortunately most of the time the consumer will only see non-performance from their service provider but the challenges are much bigger than they have control over. In simple terms NO ZESA, NO DATA, Voice Calls, SMS or USSD transactions and that’s a bitter pill to swallow but a reality on the ground.

Just as a driver is forced to park a car due to lack of fuel, companies are also forced to shut down with devastating effects to the economy.

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