via Fuel hike a new problem to industry October 17, 2014
THE recent increase in fuel prices will present a new challenge to local companies as they try to stimulate demand in the economy, a local research firm has said.
In his mid-term fiscal policy review, Finance minister Patrick Chinamasa increased excise duty on diesel and petrol to 30 cents and 35 cents respectively. Before that excise duty for diesel and petrol was 25 cents and 30 cents respectively.
In a note to investors, MMC Capital said a greater proportion of companies that depend on local consumers were feeling the pinch from local challenges relative to their peers which have a foreign flair.
“Local consumers remain under pressure as disposable incomes continue to wan. Our view is that the recent price increase in fuel will present a new challenge for the majority of companies in Zimbabwe. In an environment where companies are trying to stimulate demand by reducing prices, additional costs pressures will negatively affect this endeavour,” MMC Capital has said.
Fuel is now ranging between $1,52-$1,56 per litre from $1,49-$1,50 per litre before the increase.
Some companies now use stand-by generators as a source of power and the increase means they will have to bear more on production costs. Energy costs for companies constitute 10-15% of the total costs of doing business.
“In order to survive, a lot of companies need to change their business models which are heavily aligned to costs rationalisation,” MMC Capital.
The latest statistics from the Confederation of Zimbabwe Industries (CZI) showed that the manufacturing sector is on a decline hamstrung by capital shortages, low confidence, poor industrial linkages, low productivity, lowering the cost of doing business, porous borders, lack of accountability by local authorities and parastatals.
CZI said the Purchasing Managers Index (PMI) stood at 43,5% during the period under review while the capacity utilisation continued on a downward trend.
The PMI is a diffusion index that looks at new orders, inventory levels, production, supplier deliveries and employment conditions. Each of the five factors are adjusted and weighed according to the time of the year and other factors.
COMMENTS
Oh that’s right! Forgot that more taxes reduces people’s incentive to spend money, so less money is actually raised in the end. Gee, Economics 101.
Guess, Chinamasa was thinking that in an indiginized economy, everyone would of course want to spend more money and pay more taxes to support everyone else! Glory to indiginization! Let’s all go out and spend every bit of coin that we own!
HAHAHAHA, I just ran a spell checker and when it came to the word indiginization, it wanted to replace it with indigestion. They both describe an uncomfortable situation we find ourselves in. HAHAHAHA!