CUTS says there will be more suffering in Zambia

Consumer Unit and Trust Society (CUTS)-International Zambia says the increase in fuel prices will further push prices of consumer goods and services thereby subjecting consumers to more misery.

In a statement, CUTS Centre Coordinator Simon Ngonga said the decision is ill timed and the consciousness of the parent Ministry charged to manage economic affairs – the Ministry of Finance- ought to be questioned.

‘It is clear, going by what we perceive as unilateral decisions by different sectors such as energy and water to hike prices of these essential products and services, that there is either paucity (insufficiency) in economic management or the ministry has forgotten that it ought to strive to make the leaving standards better and not worse of.

‘The latter should entail, vetting some of the unilateral pressing decisions by different ministries/regulators, against the economic realities on the ground’ read a statement.

CUTS said, ‘for example, the most recent upward adjustment of fuel comes at the backdrop of a number of reforms and decisions which have already resulted in most prices of consumer goods and services going up. Just recently, CUTS International, in partnership with Economics Association of Zambia (EAZ), Agriculture Consultative Forum (ACF), and Zambia Voice conducted a study to assess the impact of the removal of fuel subsidy which revealed that the average cost of living had increased by 35 percent. ‘Government also reformed the maize subsidy and currently there hasn’t been a study which quantifies the impact on other sectors (downstream markets) and household consumers.

‘But going by the skyrocketing Mealie-meal prices and other by-products, it is reasonably correct to assume that this reform also has pushed prices up.’

CUTS said government even in the 2014 budget implemented tax reforms which have resulted in prices of consumer goods and services going up. 5 percent excise duty on airtime, 20 percent excise duty on alcoholic beverages, and 0.2 percent excise duty on all money transfer transactions

‘Further, National Water and Sanitation Council (NWASCO) approved an upward adjustment for water. This adjustment varies based on different location – with areas (such as Chirundu) receiving a marginal downward adjustment.

‘However, for most Lusaka residents, the adjustment was around 10 percent on average. If one aggregates (bearing in mind the variances in the water pricing adjustments) based on these figures, it is clear that the cost of living could have gone up by 70.2 percent on average. The need to have a quick and accurate detailed quantified analysis on the cost of living is ripe.’

‘With these figures presented, the question which now arises was how much more will Government continue subjecting the consumer welfare to these price adjustments which are worsening the standards of living

‘The fuel price adjustment, though marginal, will surely further raise the cost of living and subject consumers to unnecessary expenditure cuts.’

CUTS said a solution ought to be found to address the shocks in oil pricing domestically.

‘Like many commentators have said, a permanent remedy was required to be defined “Today” and not wait any longer. The link Zambia project, if well managed, could administratively reduce the cost of fuel – as routs will be shortened through inter town connections. But this is a long term project and is not entirely the remedy. There are suggestions for Zambia to join countries like India to start producing fuel from plastic wastes. There are individuals who have initiated this process in Zambia and what was required is for government to support such entrepreneurial spirit. This could surely provide a formidable alternative to the imported fuel.

On the worthless Kwacha, CUTS said there is also need for the Ministry of Finance and Bank of Zambia (BoZ) to ‘seriously show leadership and have grip in the management of the financial sector (especially the exchange rate) and real economy. Zambia has one of the erudite monetary policy instruments which should not fail us this time.’

CUTS said ‘we should not sway from the real causes of the depreciation of the kwacha – which continue to negatively impact on sectors such as fuel.

One of the major causes of the loss of value is the fact that Speculation among private sector players, especially those in the export market such as the extractive sector, was still high.’

CUTS explained that the non-inclusiveness and buy-in from private sector on key policy instruments e.g. SI 55 and 33, despite their good intentions, remain among the major necessitating factors to the peculation – which has resulted in holding of re-investments. The issue surrounding the SI 89 is another.

‘Yes, the intention to halt the export of raw copper is well intended. But we do not have the capacity to refine – and this entails that the trade balance might continue to fractuate in the negative – as copper remains one resource which we lucratively sell and has contributed to the strengthening of the kwacha. There is, therefore, need to hastily expedite the process of industrialisation so that strong backward and forward linkages in the upstream and downstream industries in this sector are created.

 

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