Measures to ensure price stability have been largely successful, especially in the latter part of 2020, but there are growing concerns over rising rates and utility charges which might present significant challenges.
Utilities are critical as they provide the much-needed water, energy, transport and communication to both households and industry.
Utilities’ pricing levels tend to have a forward impact on prices as well as incomes.
Last week, the Harare City Council (HCC) approved a $32,7 billion budget for 2021, which will be largely funded by rates.
According to HCC’s approved financial plan, an average high-density household is now required to pay $1 736 a month for basic services, while a household in medium-density suburbs will now fork out $4 558 per month.
Economist Persistence Gwanyanya said the increase cannot be justified.
“A 2 800 percent increase is not reflective of what is obtaining on the ground. The last half of 2020 has been marked by pricing stability.
“The hiking of service charges that do not reflect service delivery is detrimental to price stability. There is no way this country can rebuild its economy without significant contributions from municipalities. Public utilities used to contribute around 40 percent to Gross Domestic Product per annum.”
Confederation of Zimbabwe Retailers (CZR) president Denford Mutashu agrees.
“Rate increases have negative ramifications on an already struggling business community in a Covid-19 lockdown environment . . .
“The margin of the rates increase is highly unimaginable in an environment the foreign currency auction system stabilised inflation and restored confidence,” he said.
Of greater concern is that ratepayers are not enjoying services that are being billed by municipalities. Last month, the Zimbabwe Revenue Authority (Zimra) garnished HCC’s accounts over $115 million in outstanding taxes.
“The garnishee order is adversely affecting council’s daily operations as the city cannot honour payments to service providers, including fuel and water treatment chemical suppliers,” said HCC.
“This has seen the city failing to collect refuse in time, resulting in garbage piling up across the city. The city is resultantly failing to pay its workers.
“Management is currently engaging the revenue collector to seek relief so that available resources can be ploughed into service delivery. Revenue inflows have been affected by the effects of Covid-19.”
And in the same month, the Government ordered a forensic audit into the operations of the local authority following several allegations of corruption against top officials, including the mayor. Other statutory bodies are reviewing charges. The Zimbabwe National Road Administration (Zinara) last year raised toll and licence fees by 350 percent.
In November, the Zimbabwe Electricity Transmission and Distribution Company (ZETDC) increased tariffs by 50 percent after increasing by the same rate the previous month. Mr Gwanyanya, however, said a reasonable upward review would not be a bad thing as most of the rates were heavily subsidised.
“Some utilities were subsidised. Electricity at some point was 1 cent (US dollars), while procurement was at 12 cents (US dollars). Previous subsidies were destabilising this economy.”
In 2019, the Government took a deliberate stance to move away from subsidies to eliminate the distortions they were creating in the market.