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The East African : Sep 12th 2015
MINERAL TRADE WOES Licensing setbacks eat into Rwanda’s exports Page 33 BUSINESS SEPTEMBER 12-18,2015 RISING COSTS By ALLAN OLINGO The EastAfrican their weakening currencies, which have led to a rise in the cost of various goods and services across the board. The Tanzanian, Ugandan, Kenyan and Rwandan currencies have depreciated against the dollar in the past six months, setting off a rise in inflation and, therefore, retail prices. For example, with the C exception of Tanzania, fuel prices have been on the rise across countries in the region since May, with government agencies blaming the situation on the decline of their currencies against the dollar. Last month, the Kenya Energy and Regulatory Commission (ERC) increased fuel prices for the fourth time in a row, citing the sliding shilling. ERC director-general Joe Ng’ang’a said that, save for diesel and kerosene, the average landing cost of super petrol increased by 1.25 per cent, from $718.97 per tonne in June to $727.97 per tonne in July. “On the other hand, we saw the average landed cost of imported kerosene during the period drop by 11.74 per cent from $619.21 per tonne to $546.52 per tonne. Additionally, that of diesel also decreased by 8.90 per cent, from $610.94 per tonne to $556.55 per tonne,” said Mr Ng’ang’a. The price of super petrol has increased by 15 per cent in the past four months owing to the volatility of the shilling. In Uganda, consumers are paying Ush4,031 ($1.10) on a litre of petrol, up from Ush3,701 ($1.01) at the beginning of the year. In Tanzania, consumers got a reprieve last week when the Energy and Water Utilities Regulatory Authority (Ewura) lowered the price of fuel by between 5 per cent and 9 per cent in its latest monthly price caps, citing lower international energy prices and a stable local currency. “To a large extent, the fall in the local market prices has been caused by a decrease in the prices of petroleum products in the world market, as well as the stability of our shilling against the dollar,” Ewura said in a statement. The price of petrol dropped by Tsh137 ($0.063) to Tsh2,233 ($1.04) per litre, while diesel went down by Tsh194 ($0.09) to onsumers in the region are feeling the pain of Consumers in the region feel pain of volatile currencies Inflation is on the ≥ise ac≥oss count≥ies, and so a≥e ≥etail p≥ices, including the cost of fuel, elect≥icity and c≥edit f≥om comme≥cial banks PRICE CHANGES ACROSS THE REGION (JANUARY-AUGUST) Fuel prices per litre Tanzania Rwanda Uganda Kenya $0.94 $1.04 $1.22 $1.40 $1.01 $1.10 $0.88 $1.10 January 2015 Currency changes against dollar Jan-15 Ksh Ush Rwf Tsh 90.5 2,771 1,733 Percentage change 11pc 15pc 9pc 25pc August 2015 Sep-15 Percentage change 105.2 3,660 685.03 730.67 2,177.12 Source: Respective energy regulatory bodies Tsh1,832 ($0.88) per litre. In Rwanda, pump prices rose slightly in the August review by the Rwandan Ministry for Trade and Industry, with the cost of a litre of diesel up by 2.2 per cent to retail at Rwf933 ($1.5). The price of petrol rose by 2.6 per cent, selling at Rwf1,023. ($1.40) per litre. Electricity prices have also risen, due to an upward adjustment of the fuel and currency fluctuation levies. Last month, the director of Rwanda’s Utilities Regulatory Authority (Rura) Patrick Nyirishema said that starting September, consumers will pay more for water and electricity. According to Mr Nyirishema, Rwandan consumers will pay 35 per cent more for electricity at Rwf182 ($0.25) per kilowatt hour, up from Rwf134 ($0.18) — the biggest increase since 2012 — while water tariffs will rise by 19 per cent. In the past four months, Kenya’s ERC has increased the forex levy four times in a bid to compensate for the weakening shilling. The ERC adjusted the fuel cost on electricity consumed in August upwards to Ksh3.11 ($0.03) per unit, from Ksh2.51 ($0.024) in July. Similarly, the forex levy has increased to a two-and-a-half- 16.24% 32.08% 6.66% 25.63% With the exception of Tanzania, fuel prices have been on the rise across countries in the region since May.” Electricity prices per kilowatt hour $0.19 $0.23 $0.20 $0.25 $0.15 $0.24 $0.18 $0.20 Percentage change 21pc 25pc 60pc 11pc LOWER CARGO COSTS Kenyan taxman integrates Ugandan goods tracker at Mombabsa port Page 34 31 year high of Ksh1.49 ($0.014) per unit, from last month’s Ksh0.89 ($0.008) per unit. Uganda’s Electricity Regulatory Authority (ERA) said its upward tariff adjustment was informed by several factors, including the foreign exchange situation. “The movement in the exchange rate of the shilling against major currencies directly affects the costs for companies involved in the electricity supply industry (ESI), because a portion of these companies’ costs are incurred in foreign currency while the retail tariff is charged and revenue collected in shillings,” ERA said in its third quarter 2015 tariff review report. ERA said that its review indicated that the depreciation of the Ugandan shilling in the second quarter of 2015 has increased the sector’s annualised revenue requirement by Ush128.2 million ($36,055), thus increasing the end-user tariffs by a weighted average of Ush28.6/kWh ($0.08/kWh). Interest rates rise The region has also seen a rise in interest rates, with Uganda being the worst hit. Since April, the Bank of Uganda has increased the CBR by 500 basis points, from 11 per cent in April to the current 16 per cent, in a bid to support the shilling. This has seen banks such as CFC Stanbic and Standard Charted Bank raise their rates to an average of 24 per cent, affecting loan repayments. The Kenya Banks’ Reference Rate rose in July from 8.54 per cent to 9.87 per cent. “The change in the KBRR is very marginal, but the risk premium remained the same,” said Kenya Bankers’ Association chief executive Habil Olaka. Risk premium is the interest rate charged by banks on loans to private sector customers minus the “risk free” Treasury bill interest rate at which shortterm government securities are issued or traded in the market. Aso affected is car importation business. Already, Kenyan dealers Nissan and Mitsubishi have changed their pricing to dollars, quoting both their sales and receiving prices in the greenbuck, in a move meant to cushion them from forex losses, but one that will hurt buyers. Last week, DT Dobie, the local Nissan franchise holder, put out a newspaper advertisement showing in dollars, the prices of its single-cabin and doublecabin pickup trucks.
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