4 January 2020.
We are concerned with the culture of deliberate economic sabotage being peddled by the Patriotic Front (PF) regime against Zambia’s mainstream economy.
While the UPND and President Hakainde Hichilema have consistently called for a reduction, suspension or removal of some controllable cost components around the pump price of fuel in order to help the mainstream economy, the PF have gone ahead to scrap VAT on petrol and diesel in order to mask their inability to manage the fuel supply in Zambia, whilst offering no benefit to the ordinary Zambian through a reduction in the pump price.
We are aware that the PF government has accumulated $727m (as at 30 June 2020) in unpaid invoices to International Oil Suppliers for the supply of fuel, the equivalent of the first Eurobond, or almost a whole year’s worth of fuel imports. Despite ERB insisting that it applies cost plus pricing, and consumers paying for fuel in cash, we wonder where this money received by the government has gone to.
Now that the Oil Suppliers are no longer willing to supply the government, Oil Marketing Companies (OMCs) have been requested to take on the outstanding contracts and directly import fuel.
However due to PF aligned middlemen and ministers who have hijacked the fuel procurement and supply chain, resulting in inflated oil supply contracts, OMCs have been unable to fulfil the supply contracts at current pump prices.
The offer of VAT relief to essentially only OMCs in order to convince them to import fuel and forestall an impending fuel crisis, without a required increase in the fuel price, is only a short-term remedy.
The VAT relief which should have been passed on to consumers through a reduction in the pump price, is instead going to increase the cost of doing business as ordinary businesses will no longer be able claim Input VAT, effectively increasing their fuel bill by 16%, with a downstream impact on consumer prices.
We note that this move, which offers no benefit to the public, whilst reducing VAT revenues for the government, is a further nail in the coffin for the 2021 budget.
The UPND takes the view, that SI No.125 of 2020 will harm the Zambian people, in that it not only fails to address the biting pump price of fuel for consumers, but it also directly diverts public money away from critical services such as education, healthcare and support for agriculture and instead channels it towards the consolidation of political power by the PF.
President Hakainde Hichilema reiterates his commitment to reforming domestic taxes and levies on the pump price of fuel, as well as cleaning out excessive middlemen activities in the procurement, supply and distribution of fuel in order to deliver maximum benefits for consumers.
UPND Presidential Spokesperson
4 January 2020.