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GOVERNMENT believes that there is compelling evidence, particularly in the distorted and huge price differentials of up to US10 cents obtaining in the petroleum industry, to prove that there are price-fixing cartels in the sector.
Under the Competition Act (Chapter 14:28), cartel conduct, which is defined as an unfair business or trade practice, is a crime and attracts a fine ( not exceeding US$2000) or imprisonment for a period not exceeding two years, or both, in the case of individuals.
In December last year, The Sunday Mail Business reported that the industry was potentially prejudicing motorists through maintaining prices in an environment where international prices had been declining for more than six months. The Competition and Tariffs Commission (CTC) later instituted an inquiry into the petroleum sector.
Last week, CTC chairperson Mr Dumisani Sibanda intimated that it was premature to reveal the findings of the inquiry before Government concluded a detailed study.
“Zera has decided to get some South African company to conduct a detailed study of the petroleum sector pricing so we are going to rely on the information that is going to come from that study,” said Mr Sibanda.
Government is currently in the process of establishing a petroleum pricing study whose draft report is expected to be ready by October 23 this year with the final paper and recommendations are expected mid-November 2015.
Genesis Analytics, a South African consulting company, is conducting the study.
Energy and Power Development Ministry Permanent Secretary, Mr Partson Mbiriri last week said Government was unhappy that when fuel prices are going down on the international market, the benefit is not quickly transferred to motorists as is the case when prices trek upwards.
Mr Mbiriri also said it is illogical that fuel prices are higher in Harare and fairly cheaper outside the capital when fuel is stored in Msasa, Harare, meaning that Harare fuel retailers incur lesser transport costs.
“The differentials (in fuel prices) are so huge, it’s unbelievable. When you have a US10c differential in the price of a product, that must send all sorts of bells. It must make my Minister’s tummy complain, even within a brand, the differences are at this time so material.
“Surprisingly, Harare seems to have the most expensive fuel than outlying areas . . . it beats common sense when the product is available at Msasa, a stone’s throw away.
“Why would it be more expensive than further out? It kind of beats logic although someone might say that when volumes are lower out there, competition is steeper and therefore retailers are trying to push sales.
“Nonetheless, we have a kind of distorted market as I speak. It is however, important to note that the competition that we see is actually not real competition. There are allegations, there are accusations that we have a cartel starting from wholesaling right up to retailing and these concerns, as they say, there is no smoke without some fire,” said Mr Mbiriri.
He said that prices are only expected to be US2c or US3c higher in locations that are further away from Harare due to the higher costs arising from longer distribution distances from Msasa.
A snap survey recently conducted by The Sunday Mail Business showed that top players such as Total Zimbabwe were charging US$1,53c per litre in Harare while selling at US$1,42c per litre in Gweru.
Total has since downwardly reviewed the price to US$1,45c per litre in Harare.
Zuva Petroleum is also selling at US$1,45c in Harare while other players such as Extreme Service Station are selling at US$1,39c.
Mr Mbiriri said some players are using their “significant influence” to hold fuel prices at “artificially higher levels” when they “know that it is feasible” to lower the prices of their fuel even by as much as US7c per litre.
“Questions then arise as to how it is feasible for one company to charge very low prices while the other charges prices that are almost on par with the maximum pump price set by Zera (the Zimbabwe Energy Regulatory Authority), while they face basically the same distribution costs?
“This shows that there is significant room for lowering prices but some players are simply not doing so, preferring to use the advantage of their geographic spread,” said Mr Mbiriri.
Meanwhile, Zera has trained over 200 people on the minimum standards expected at service stations.
Zera chief executive, Engineer Gloria Magombo said some service stations have been advised now how to improve standards.
“We are going further to come up with a retail sight grading system, something which we have picked up from the Zambians where they have A, B, C, D grades so that at your forecourt, you display your grade and the customer will make a decision whether to come to your D grade or A grade service station.
“We are actually going to be implementing that beginning of next year but we have trained 200 people in terms of service station standards in Harare, Mutare and Bulawayo,” said Eng Magombo.
Online Reporter