Zambia Association of Manufacturers president Rosetta Chabala says the industry is slowly becoming uncompetitive in the sub-Saharan region following the increase in the cost of production caused by continuous fuel price increment.
And Chabala says the sudden increase in prices of products by retailers and traders has also affected the manufacturing industry as the rate at which goods are purchased reduces.
In an interview with News Diggers! in Lusaka, Chabala said continuous fuel price increases had put pressure on the manufacturing industry, forcing it to hike prices, thereby, becoming uncompetitive in the region.
“The fuel increase has put pressure on our prices because number one; transportation cost. Not only is it transportation of finished products that coming from the companies, but also the inputs that are coming into the country. Already, that just goes up tremendously and we are competing with the region, and if our transportation costs are too high, and we factor that into our pricing, we are just are becoming uncompetitive. Currently, we are uncompetitive, that’s number one. And, obviously, you know the supply of energy; that is not necessarily something we can count on. Most manufacturers in the industry do have some generators so that whenever they have no electricity, they can run their machines. We have already started seeing Zesco maintaining different parts of the country and so there has been some sort of load-shedding,” Chabala explained.
“And so, many people have started using generators. So, again, that puts quite a lot of pressure on the manufacturers because then our product cost is out of this world! You cannot just actually be competitive. And if you cannot be competitive, then you cannot sell. And if you cannot sell, it means that even the foreign exchange earnings that we are looking for, we will not have them because our pricing is just too high. I think, yes, we know that the tariff for fuel is also quite high and that money goes to government. So, maybe, it would actually be better if government would then do a little bit more of a rebate on fuel for production. So, if it’s going into production and transportation of raw materials and stuff, we should get a rebate on the tariff that they have put on fuel because I mean, fuel is one cost, but most of that cost is tariffs. So, the tariff for production should be way much lesser than the tariff for any user.”
And Chabala, who is also ZAMEFA managing director, added that the sudden increase in prices of products by traders had also affected the industry as the rate at which manufactured goods were purchased reduces.
“I know we expect it and when we are calculating corporate tax, some of those are things we expect, but then if it’s affecting prices directly then it doesn’t help anybody. And you see some of these prices; it’s not even the manufacturers, it’s the traders that increase before the manufacturer increases anything. We, as the manufacturer, are concerned about, ‘are we going to be competitive.’ How much are the competitors’ prices? I mean, by the time they were announcing the fuel price [increment], I was walking into some of these chain stores, the very next day, they were increasing prices. So, it’s not necessarily even the manufacturers, it’s actually the traders themselves. The manufacturer you find that they have not even increased, but the trader has gone on the market and increased the price both of which is not paid back to the manufacturer so the manufacturer doesn’t really benefit from that because we are busy thinking about how to be competitive,” said Chabala.
“And the price structure in this country doesn’t also make sense because if the increase in fuel has just happened, surely what you have is also stock that you bought at a certain price. But you increase the price and the argument is because the re-stocking will be more expensive; there are lot of things that we need to look at. So, it’s not necessarily the manufacturers, it’s the people that sell these products on our behalf, they actually go ahead and increase the prices. And we do become affected because then your products start going slow. Because if you were selling it at a certain price, and people could afford, and all of a sudden it’s at another price and people cannot afford, then if they were buying two they will start buying one.”
Earlier this month, the Energy Regulation Board (ERB) shocked consumers with an impromptu fuel price hike, which saw all fuel types adjusted upwards by over K2.00 per litre.