The Sunday Mail
Prices of basic goods and services will remain the same despite the recent hike in fuel prices after Government and business last week agreed to allow the effective implementation of the rebate system designed to offset additional production costs.
Parties also heard during Thursday’s meeting between Government and industry that fuel costs account for between 5 to 10 percent of overall production costs.
Essentially, the rebate system provides tax relief to registered businesses by offsetting the margin of the fuel price hike through the VAT system.
It covers key productive sectors such as manufacturing, mining, agriculture and transport.
Industry and Commerce Minister Mangaliso Ndlovu told The Sunday Mail yesterday that the parties agreed that any price adjustments were not justified as the rebate system provides a “convenient mechanism” to shield business against additional costs.
“We made an important agreement with the industry players: that there is no justification whatsoever to increase prices as a result of a fuel hike. We agreed that the rebate system is a convenient mechanism to ensure that there are no extra costs that are passed on to the final consumer.
‘‘We managed to dichotomise the issues at hand and we came up with an agreed position that fuel alone is not the major contributor to the cost of production. Fuel alone doesn’t account for more than 5 percent of total costs on average. It is only in the transport sector where the cost of fuel can lead to a direct upward variation of 40 percent.”
Industry, Mr Ndlovu said, was agreed that the old fuel prices had become untenable.
“They actually said that they were in support of the fuel hike because it was long overdue. Some of them actually stated that they had in some instances already increased prices before the fuel hike so they will not increase prices any further if they are given access to fuel.”
He added that companies will benefit from the rebate system after supplying Government with proof of the expense they would have incurred in buying the precious liquid.
“From the date of announcement, the companies should keep proof of payment. The rebate system means that companies that are in the productive sector, which use fuel for the purposes of production, will get their fuel subsidised. These companies should be registered so that they can claim their rebate through the VAT system. We are working on a sector-specific system; for example, when it comes to the commuter omnibus operators, they pay Presumptive Tax around the 10th, so when the taxes are close to the payment date, they can work on claiming their rebate around that time,” he said.
The Minister said another meeting between Government and business leaders to fine-tune the rebate payment system has been slated for this week.
“This is something that we will continue to look at, but basically there is no price increase that is more beneficial than the rebate mechanism.
‘‘In any case, we will be monitoring if there is any abuse system and anyone abuses the system will be blacklisted from benefiting in the future, and will also suffer any other penalties in line with the laws of the country.”
Confederation of Zimbabwe Industries (CZI) president Mr Sifelani Jabangwe confirmed their price pact with Government.
“As industry, we have already done our numbers that the overall costs of our goods should be between 3-10 percent if we factor in the fuel increase. We, therefore, expect that with the work we are doing to implement the rebate system, there is no need for any price increase once the rebate is in place.
‘‘So what we are basically saying is that the impact of the fuel increase is marginal and it can be prevented from affecting the consumer through the rebate system.”
Mr Jabangwe said this week’s follow-up meeting with Government will dwell on the effective enforcement of the rebate system.
“We still need to finalise the models and there are various proposals that were put forward which we need to agree on. So we are looking forward to next week’s meeting to finalise these issues sector by sector.”
He said last week’s meeting was also attended by retailers, representatives from the mining sector, agriculture and transport operators, among others.
Addressing journalists in Harare on Tuesday, permanent secretary for Finance and Economic Development Mr George Guvamatanga reiterated that the rebate system will cushion against price increases.
“This rebate system, in short, will mean that all the sectors that I have mentioned will apply through Zimra (Zimbabwe Revenue Authority) to be given back the increase in the price of fuel, which is the difference between what they were paying before the fuel price was increased and the new price of fuel.
“In short, there is no impact for the transport sector caused by the fuel increase, there is no impact on industry, there is no impact on agriculture and there is no impact on mining.
“So there is absolutely no reason or whatsoever to have any price increase that is going to be related to this increase on fuel because we are going to give them back their money that they would have paid, which is the difference between where the price was and what it is now.”