Industry says no to fuel levy

Business
Industry in Zimbabwe says government’s proposed fuel levy meant to finance a new Road Accident Fund will hike the cost of doing business in the country and rise prices of basic commodities.

Industry in Zimbabwe says government’s proposed fuel levy meant to finance a new Road Accident Fund will hike the cost of doing business in the country and rise prices of basic commodities.

BY MTHANDAZO NYONI

Zimbabwe National Chamber of Commerce president Davison Norupiri
Zimbabwe National Chamber of Commerce president Davison Norupiri

Government recently revealed plans to introduce a fuel levy to finance the Road Accident Fund that will ensure compulsory compensation of road traffic accident victims.

The fund, according to government, would also cover disbursements of funds to victims on compassionate and medical grounds as well as bolster paramedic visibility on the country’s roads and institutions.

However, industry is wary of the levy, saying it would suffocate the already suffering industry as it would mean an increase in fuel prices.

“It’s a very noble and good idea [the Accident Fund] but it will definitely impact on the prices of goods and services. The timing might not be right. It might not be good to the industry and general public. Ordinary people will suffer a lot because usually, businesses pass cost to the general populace,” Zimbabwe National Chamber of Commerce president Davison Norupiri, said.

Norupiri said the levy would increase the cost of doing business, thereby reversing gains made through promulgation of policies such as Statutory Instrument 64 of 2016.

Confederation of Zimbabwe Industries president Busisa Moyo said all commercial fuel should ideally be exempt from this levy.

“Business is paying over two dozen levies, rates, taxes, statutory and registration fees, government charges including high toll gate fees for trucks transporting raw materials. Even for consumers, they will have less to spend and demand will be depressed,” Moyo said.

Manufacturing industry in Zimbabwe is currently faced with numerous challenges which include antiquated plant and machinery, inflexible labour laws, labour costs, influx of cheap imports, high cost of production, weak effective demand, as well as persistent liquidity constraints.

In 2014, government increased tollgate fees by a whopping 100%, a move that triggered ripple effects on prices of basic commodities as well as transport fares.

Small vehicles are now required to pay $2, up from $1, while haulage trucks are now paying $10, up from $5.

Moyo said he recommended government to stick to its own well intentioned plans to radically improve the ease and cost of doing business. He said, according to government’s own Cost Driver Study issued in December 2014, Zimbabwe is 45-55% more expensive than its regional peers.

“We all know that Southern African Development Community is a very low standard to aspire to but even then Zimbabwe is still uncompetitive in terms of those economies before we compare to Asia and Europe,” he said.

Consumer Council of Zimbabwe Bulawayo regional manager, Comfort Muchekeza said the levy would spark an increase in prices of basic commodities, thereby burdening the consumers.

He also questioned government’s capacity to implement and monitor the fund given its failure to monitor other funds.

“The idea of a Road Accident Fund is good but over the years we have seen many funds which were created but that never reached the targeted beneficiaries. Will the fund get to the intended beneficiary? Government should first assess and see whether it has the capacity to handle the fund,” Muchekeza said.

“We don’t want to shoot down the idea but before it is implemented, government should carry out proper consultations and let the contributors know the advantages and disadvantages of the fund,” he said.

Muchekeza said when National Social Security Authority (NSSA) was created 20 years ago, people cancelled their insurance policies thinking that they had social security but they are now struggling.

“Now we see many pensioners struggling despite having contributed to NSSA,” he said.

Economic analysts said government should instead put the levy on vehicle owners who paid third party insurance fees in order to encourage them to take out full comprehensive insurance policies.

“The people who cause accidents should be responsible for compensation. Insurance policies have been designed to meet such claims and drivers who refuse to take out fully comprehensive insurance policies leave themselves liable to fund compensation claims themselves,” economic analyst John Robertson, said.

“Government is trying to side-line insurance premium payments into its own coffers through a new levy, but the formation of a Road Accident Compensation Fund will encourage many people to believe that they are now covered as the fund will pay the compensation. So they will stop taking out the proper insurance policies,” he said.

Robertson said when government made NSSA compulsory, the other pension funds had to become voluntary and their contribution to the nation has fallen in importance as their premium income has fallen.

“I believe that government should instead put the levy on drivers who pay the minimum insurance fees in order to encourage the drivers to take out fully comprehensive insurance policies,” he said.

“Higher fuel prices will be a big mistake. Zimbabwe’s fuel prices are already close to twice that in neighbouring countries. The more we add to costs in Zimbabwe, the fewer the new business ventures will be,” he said.