‘Electricity, fuel price hike may hit inflation targets’

‘Electricity, fuel price hike may hit inflation targets’

SUN BUSINESS writes @SunZambian A HIKE in fuel and electricity may hinder meeting the inflation tar gets in 2022 as costs of produc tion will go up, the Zambia Asso ciation of Manufacturers (ZAM) has said. The price hikes will also result in an increase of the cost of pro duction, cost of transportation and price of locally manufac tured products. Association President Ashu Sagar said fuel and electricity are key raw materials in the manufac turing sector and account for large costs in many production processes and supply chains. He said electricity in Zambia is already marred with erratic supply, therefore increasing the price of electricity coupled with downtime from load manage ment increases the operating costs of manufacturers signifi cantly. Sagar added that the in crease in the cost would inevi tably be passed on to the con sumer in order to ensure the manufacturers remain profit able, contribute to government revenue and survive noting that the increase in the price of man ufactured products would be ex acerbated by the increase in the transportation costs, which will be induced by the fuel price hike. He noted that having been subjected to a turbulent period during the Covid-19 pandemic coupled with an unstable eco nomic environment. “ZAM is of the view that a phased removal of subsidies will allow manufacturers and consumers to have a smoother transition into higher costs than an outright full removal of subsi dies, which will not factor in con sumer welfare,” he said. “ZAM has a goal to grow the manufacturing sector in Zambia to start contributing about 20% of the gross domestic products (GDP).” He added that Zambia’s potential in manufacturing re mains largely untapped even in the copper value chain were the country currently exports semi processed copper when it can export finished copper cables and other finished copper prod ucts which can double or even quadruple the current GDP.