By Mercy Chewe
Copperbelt based good governance activist Peter Mulenga has opposed the proposal calling for the re-introduction of subsidies on fuel as a way of lowering the pump prices of the commodity.
Former Energy Minister in the MMD regime George Mpombo on Monday urged the Government to subsidise fuel in order to lower prices of the commodity.
Dr Mpombo said the recent hike of fuel prices by an average of K4 has worsened the suffering of many citizens.
Democratic Party president Harry Kalaba has also advocated the re-introduction of fuel subsidies saying the fuel price hike of an average of K4 is gigantic and will throw the economy into disarray.
But Mr. Mulenga has said subsidies on fuel that were not benefiting people at the grassroots but industrial consumers like mining firms.
“There are currently debates and calls for the Government to bring back fuel subsidies. Unfortunately Zambia has no control on the geopolitical tensions happening between Russia and Ukraine. This has resulted in high crude oil prices as Russia is 3rd largest oil producer. The war has an effect on supply and production. Removal of fuel subsidies means that the Government wanted to channel the fuel subsidies to develop other sectors like health in recruitment of staff, drug procurement, improve standard of education etc. This however remains to be seen. Most of the fuel subsidies were technically benefiting the huge fuel consumers like mines. The removal of subsidies will without doubt increase the price of essential commodities in the short to medium term,” Mr. Mulenga said.
“Let us understand what it means to subsidise fuel, it is when a government lowers the cost of fuel energy, raises the price received by energy producers, or lowers the price paid by energy consumers. Essentially, it’s anything that rigs the game in favor of fuels compared to other energy sources. The most obvious subsidies are direct funding and tax giveaways. The bad thing is Fuel subsidies also take public money away from other users.”
Mr. Mulenga said :”Political elites can argue all they can, but believe me removing fuel subsidies was the best the Government did and was long overdue, even President Sata wanted to remove them. The money saved can be better invested in refineries, roads and major infrastructural projects which in the long-term will ensure sustainable business development and wealth generation for our citizens. First, fuel subsidies have survived when other subsidies have been removed because those benefiting from them are very powerful. They cut across a broad segment of the upper echelons of the government and political elites. No wonder there is a lot of noise currently.”
Mr. Mulenga charged that subsidies on fuel were not good for the Zambian economy.
“Why are oil subsidies bad economics? Every year, the Zambian government ran huge budget deficits that could have been avoided if money budgeted for oil subsidies were allocated to other critical projects. Subsidies should be used to spur investment in activities that raise the productive capacities of an economy (such as education, health, entrepreneurship, and infrastructure). They should be targeted at strategic sectors of the economy. They should not be used to finance non-durable consumption items like petrol,” Mr. Mulenga said.
“Oil subsidies are inequitable, as they transfer the national wealth to those who own several cars and add little or no value to the national economy. In lieu of subsidies, the government should invest massively in public transportation and boost the transport allowances of public-sector workers. Also there should be a clear communication to Zambian that the removal of fuel subsidies favours the poor, and eliminates one of the several perks that the Zambia elites undeservedly enjoyed,” he said.
Mr. Mulenga concluded:”On the other hand, we need to see the Government doing more in the health sector, there are currently no drugs, so if they want to justify the removal of subsidies, we need to see more drugs in clinics, hospitals etc.”
