Lusaka, September 23, 2019
In a statement released on 23 September 2019, the Energy Regulation Board has indicated that it has revised the price of fuel upwards. The Consumer Unity and Trust Society (CUTS) is deeply concerned with the negative impacts that this will have on consumers, particularly low-income consumers.
In 2017, CUTS and the Zambia Institute for Policy Analysis and Research (ZIPAR) undertook a study entitled “No Such thing as a Painless Wean” which looked at how the 2016 fuel price increase affected transport consumption and consumers’ coping strategies. A number of findings from that report can be used to understand the impact that this price hike will have on consumers.
The majority of consumers in Zambia will likely be affected by the rise in fuel pump prices through higher bus or taxi fares. It can be expected that public transport providers will soon increase their prices as they shift the burden of the higher pump prices to consumers.
One of the key finding of the report was that the majority of all respondents at all income levels said they shifted expenditure from basic needs towards transport while a few resorted to cheaper modes of transport as coping strategies. Approximately three in every five respondents said that they had to cut expenditure on
basic needs such as health, education and food as a way of coping with the increased cost of transportation while about one in every five said they resorted to a cheaper mode of transport.
This particular finding further broken down indicated that the impact of the price hike was felt most severely by low income consumers as more than half of the respondents earning below the minimum wage indicated that they cut back expenditure on basic needs in order to meet increased transport costs. A significant number of respondents including those earning less than MW1,000 per month reported that they reduced their expenditure on essential basic needs as a means of coping with the increased transportation costs rendering them worse off.
It important that the Government initiates studies that determine the efficiency and cost effectiveness of fuel procurement in Zambia compared to other countries in the region like Malawi, Zimbabwe and Botswana to see how it can reduce the costs associated with procuring fuel and ensure a lower pump price.
This would lessen the burden of transport costs on the poor.
To cushion the effects of increased costs emanating from the fuel price hike on the poor, there is need to allocate more resources towards well-targeted social safety nets that have high coverage of poor households and little leakage to non-poor households. Particularly, the current Social Cash Transfer Schemes and Food
Security Packs that target the poorest households in rural areas can be enhanced to play this role. While indeed the country is going through a difficult economic time, resources towards social protection must be ring-fenced in order to protect those most vulnerable.
Consumers are already feeling the brunt of the country’s economic situation and this price hike will indeed only worsen the current situation. With inflation at 9.3%, the price of goods and services are increasing at a rate that is increasingly becoming untenable for consumers. Combined with the expected price of electricity
tariffs this will likely only increase the country’s inflation rate.
By Chenai Mukumba, Centre Coordinator
For further information please contact: The Centre Coordinator, Consumer Unity and Trust Society (CUTS), House No 32, Plot 407, Kudu Road, Kabulonga, Lusaka. Email: email@example.com or phone: 097 8055 293.
The Consumer Unity and Trust Society (CUTS) International, Lusaka in an NGO that was established in 2000 to function as a center for action (policy) research, advocacy and networking on issues of trade and development, competition policy, investment regulation and consumer protection. The mission of the center is to function as a resource, co-ordination, as well as networking center, to promote South-South cooperation on trade and development by involving state and non-state actors (NSAs). CUTS implements four different strategies in its work: Research, Policy Advocacy, Capacity-building and Networking