Lusaka, January 22, 2018
2017 was a mixed year for consumers. Below are some of the key issues that affected the Zambian consumer throughout the year as well as our expectations of 2018.
The removal of energy subsidies
Tough decisions were made in 2017 when the Government removed subsidies from the fuel and electricity sub-sectors which in turn saw a hike in price for these two commodities. This was very difficult for consumers but necessary according to Government.
Fuel sub-sector
In September 2016, Zambia saw the complete removal of fuel subsidies as a measure to put the country back on the path of economic recovery, as well as reduce the burden on the treasury. As a result of the bi-monthly annual review, consumers were met with both increases and decreases in the price of fuel during the year. Unfortunately, while the increase in the price of fuel was accompanied by an increase in the price of transportation these price changes were not reflected in the transportation sector when fuel prices reduced and as such consumers were adversely affected.
In 2018 we urge the Energy Regulation Board (ERB) to stick to its commitment of undertaking bi-monthly reviews of the cost of fuel. For this process to truly benefit the consumer is important that the ERB stick to this policy commitment so that consumers can benefit when the performance of the Kwacha and the international price of oil is in their favour. In addition it is important for the ERB to maintain consistency and predictability in its interventions.
Having said that, fuel prices in Zambia are mainly determined by two factors: international oil prices and the exchange rate of the Zambian Kwacha against the United States Dollar. With regard to the performance of the key fundamentals since the last ERB statement in October 2017, the price of fuel has been on the increase since the last adjustment and so consumers may expect an increase in the price of fuel.
Electricity sub-sector
The energy sector also saw changes when the Government resolved to hike electricity tariffs by 75 percent to be done in two phases. The tariffs of electricity were increased by 50 per cent in May of 2017 and later increased by 25 per cent in September 2017. While the Government ensured a life line tariff of 200 units, there was a significant complaint from SMEs who noted that this meant an increase in production costs.
In 2018 we expect that the Government will conclude with the Cost of Service study — this study will ensure as consumers we are aware of the true cost of producing electricity and that we do not subsidize inefficiencies of ZESCO. In light of the findings of the study it is likely that we will see another change in the cost of electricity this year. We hope that the change of electricity tariffs will be across and inclusive of all sectors, particularly the mining sector.
Reduction of inflation to single digit
2017 saw a significant decrease in the inflation level. By December 2017, the Central Statistics Office (CSO) in their monthly release indicated an inflation rate of 6.1 percent. According to the CSO, the year on year inflation rate as measured by the all items Consumer Price Index (CPI) for December 2017 had increased to 201.8 compared to 196.33 recorded in September 2017. This means that on average, prices increased by 6.1 percent between December 2016 and December 2017.
As CUTS we welcomed this especially given that in February of 2016, the inflation rate reached a record high of 22.9%. The government should be commended for maintaining the inflation rate at a single digit. It is important to note however that a decrease in inflation did not necessarily indicate a reduction in the price of goods. Indeed figures as per JCTR’s Basic Needs Basket indicated thatthe November 2017 Basic Needs Basket (BNB) for a family of five living in Lusaka stood at K4,924.54 which was K40.97 more than the October BNB which stood at K 4,883.57, this is according to their December press release indicating an increase in the cost of living indeed despite the decrease in the rate of inflation.
Our expectation is that in 2018 the economy maintains single digit inflation between six and eight percent as was indicated in the 2018 National Budget Address.
Zambia Sugar Fined
The Competition and Consumer Protection Commission (CCPC) in October 2017 fined Zambia Sugar more than K76 million for price discrimination and unfair pricing after an investigation that had lasted four years revealed the irregularities. Zambia Sugar management however disputed the Commission’s findings from both the factual and legal perspective.
This investigation revealed that Zambia Sugar was charging household users in the Zambian market 41 per cent higher compared to what it charged its export customers for the exact same commodity. Zambia Sugar’s submissions that the lower prices in export markets were to meet competition in the export market meant that consumers in Zambia were being exploited because the producer did not face effective competition in Zambia.
We welcomed and commended this decision by the CCPC as the cost of sugar in Zambia had been an area of concern for us for a number of years. Indeed we too had found that Zambia Sugar was indeed exploiting consumers and were happy to see justice for consumers.
Fining of Mobile Providers
Zambia Information and Communication Technology Authority (ZICTA) in December 2017 fined all the three mobile phone operators a total of K3.1 million for failing to adhere to Quality of Service parameters as agreed in the Quality of Service Guidelines for the third quarter of 2017. They were fined for failing to meet some of the set parameters on quality of service which included Call Set up Success Rate, Mean Opinion Score, Successful SMS rate, SMS Delivery Time and HTTP success Log-ins. This was following an inspection with respect to Quality of Service provided by the three operators which was undertaken from 1 July and 30 September.
Indeed the performance of the three mobile service providers had been an area of concern for many consumers for a long time. We therefore commended ZICTA for holding them accountable but urge the regulatory authority to follow up and ensure that the mobile service providers improve the quality of their service provision. To this end we are also looking forward to the results on the bid for a fourth mobile network provider as this will indeed bring much needed competition to the sector.
Cholera
As we indicated in our previous press statement, cholera has had a significant impact on consumers. Due the outbreak that began last year consumers saw a spike in the cost of chlorine and hand sanitiser. This had the most significant impact on poor householders that were most in need of these products.
In addition to this, another concern that was brought to our attention was that there had been claims that due to the increased demand there were a number of sellers that werenot selling fully certified products to consumers. The case of Bimbe Trading Company Limited being ordered to withdraw 1880 bottles of chlorine and 910 cases was one such example. We therefore reiterate that consumers ought to be vigilant in their purchasing decisions and seek to buy products from known and well-respected brands that have undergone the certification process. If indeed they come across retailers that are misleading consumers, we encourage consumers to immediately inform the CCPC and/or CUTS at lusaka@cuts.org.
For further information please contact:
Chenai Mukumba, Centre Coordinator, Consumer Unity and Trust Society (CUTS), at cm@cuts.org or 097 8055 293.