ActionAid Zambia country director Nalucha Ziba says the looming upward adjustment in petroleum products will lead to job losses and poverty in the country because an increase in fuel prices will automatically increase the cost of production.
Reacting to Energy Minister Mathew Nkhuwa’s announcement last week that government would soon effect an increase in fuel prices due to deteriorating fuel pricing fundamentals, Ziba condemned government’s lack of consultation with stakeholders when undertaking such important decisions.
“We looked at this from the impact of the projected fuel increase to the overall Zambian economy and from the start; we looked at it from the international oil price versus the exchange rate fluctuations. And as ActionAid, we would like to take this opportunity to caution government against the lack of consultation on matters that affect citizens. This comes at the backdrop of the turbulent and fluctuation of the kwacha against the dollar, which is the major currency we use to purchase oil on the international market. The international oil prices have in the last couple of weeks recorded an increase and the government, through Parliament, has reported that there is a projected increase of the fuel prices and this is slightly owing to the fact that the price of crude oil, which is imported, has registered an increase on the international market,” Ziba told News Diggers! in an interview.
“The kwacha has experienced turbulent fluctuations and this is largely influenced by decrease in international copper prices. The situation is that companies are expected to convert foreign exchange into the local currency in order to meet their tax obligations and inflows from offshore investors for the government bonding auctioning. By implication, this, therefore, means that the importing of raw materials becomes cheaper, which reduces production cost. As a result of reduced production cost, the market becomes competitive and more firms enter into the market which results into employment creation for many Zambians. However, sadly, the projected fuel increase in the country will create the opposite of the above scenario.”
Ziba, however, said it was commendable that government was already considering hedging the exchange rate to tackle the exchange rate fluctuations that would largely affect the price of fuel.
“The hedging will provide some certainty and projections can be made based on the available resources. The government further recognizes that it’s not advisable to adjust fuel prices under such extreme volatility and unpredictable behaviour of the kwacha. The proposed measures are, however, not enough to cushion the effects that the projected increase of fuel is going to have on ordinary Zambian citizens. The increase in fuel prices will automatically increase production cost and other viable costs, which will have an effect on job security for the citizens, and most companies will resort to retrenchments and that will lead to unemployment,” she observed.
She stressed that the hiked fuel prices would also trigger an increase in goods and services.
“It’s common knowledge that when fuel prices increase, a larger share of household budgets are likely to be spent on goods and services. The same is true with businesses; the increased cost of production will simply be transferred to the end-user, who is the consumer. Higher fuel prices tend to make production more expensive and the majority of Zambians live below the poverty line, it’s survival of the fittest, while the majority remain in poverty. For instance, the current cost of mealie-meal in Shang’ombo (District), which is one of the most poorer districts in Zambia, is costing K135 as of today, meaning further increase on the fuel will have a negative impact on the marginalized populous that live in rural areas, far away from production,” said Ziba.
“We would like to caution government to institute due consideration on the plight of the poor and marginalized groups as regards the projected increase in fuel prices. The projected increase in fuel prices will awaken further the already struggling Zambian kwacha in competing against foreign currencies. This will have a serious impact in cross-border trade and especially the women who are more active in the informal sector.”