Source: Companies will embrace fuel rebate: CZI | The Herald March 6, 2019
Golden Sibanda Senior Business Reporter
The Confederation of Zimbabwe Industries (CZI), Zimbabwe’s most influential industrial lobby group, believes all business entities where fuel makes up a significant component of operating costs, will embrace Government’s fuel rebate facility.
This comes after the Government, through Zimra, recently introduced a fuel rebate system to prevent an upward spiral in the prices of goods and services after it announced just over 150 percent upward adjustment on the prices of both diesel and petrol.
The Government said it had increased the prices of fuel to plug arbitrage opportunities, which due to the previous currency situation, had seen fuel from Zimbabwe being sold on the black markets, at inflated prices, as well as in the region, in foreign currency.
It is believed that the widespread arbitrage activities in the fuel industry were partly to blame for the sudden and unforeseen marked increase in demand for fuel resulting in acute shortage of fuel at a time the country has insufficient forex for the imports.
Fuel consumption in Zimbabwe rose more than 70 percent in the six months from June to November 2018, compared to the same period in 2017. Over US$1,8 billion was spent on the fuel in that period.
As such, just before leaving for his highly successful tour of Eurasia, President Mnangagwa announced increases in the prices of fuel from an average of $1,49 per litre of petrol to $3,34 and from an average of $1,34 per litre of diesel to $3,11.
A short while after this fuel prices adjustment, the fuel situation in the country improved, before acute foreign currency shortage plunged the country back into the rut of supply challenges.
CZI president Sifelani Jabangwe said the majority of businesses in productive sectors, which incur more than 2 percent through fuel costs, will approach the Zimbabwe Revenue Authority (Zimra) to get refunds every month on the fuel consumed.
The refund is made up largely of the excise duty component leaving registered and tax compliant businesses to enjoy almost similar fuel price levels they were subjected to before the price hike was effected.
“The majority of businesses that incur more than 2 percent costs through fuel for their businesses will take the rebate and those where the cost is only 1 percent less may not take the rebate. Some of these have already factored the cost in their pricing,” he said.
Mr Jabangwe said the process of applying for the fuel refund from Zimra was a bit cumbersome, which may result in businesses where fuel is not a huge cost component not bothering to go through the “complex” process of applying the State refund.
Finance and Economic Development Minister Mthuli Ncube, recently said all tax compliant businesses should apply for the refund to avoid cost push pressures, driven by higher fuel prices, which would compel them to increase prices of goods and services.
Already, prices increases witnessed since September last year have driven annual cost of living jumps from lower single digit of 5,4 percent to 56,09 percent in January this year due to various cost push factors that include high currency premiums and higher cost of fuel.
The Treasury chief bemoaned a situation where some businesses had already increased their prices, which was a clear indication that they were no intent on taking the fuel rebate facility Government had put in place in order to hold prices steady.
Zimra has already completed drafting the framework for administering the fuel rebate facility, which was done after extensive consultations with the private business players and officials from various Government departments and agencies.
Government said only companies in sectors of manufacturing, agriculture, mining and transport are eligible to apply for the fuel rebate. The companies must not have increased prices relative to the upward review of prices for both diesel and petrol.
The rebated can only be accessed by registered and tax compliant prices, which did not increase their prices in the aftermath of the fuel price upward review.
“Zimra, in consultation with private sector, recently completed the framework for the rebate.
Only companies in productive sectors that include agriculture, mining, manufacturing and transport are eligible to apply for rebates on fuel they use on a monthly basis, provided that they can prove it was used specifically for the approved purposes.
“The thing (about the fuel rebate system) is that, we put it in place so that companies then do not then have to increase the price of their final products because fuel has gone up, because we said let’s subsidise the fuel cost within the production lines”, he said.