Of fuel shortages, bureaucratic bottlenecks

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FOR nearly two years, Zimbabwe has been experiencing fuel challenges characterised by intermittent supply in a two-pronged problem caused by foreign currency shortages and the country’s failure to produce.
While authorities claim that there are enough stocks of fuel in the country, it is only accessible from fuel traders after the government through the Reserve Bank of Zimbabwe (RBZ) pays the required amount of money.
The Zimbabwe Energy Regulatory Authority (Zera) acting chief executive officer Eddington Mazambani said the country had enough stocks of fuel which were however, bonded.
“Fuel is definitely in the country but it’s in bond belonging to fuel traders. It only becomes available to us when we pay foreign currency.
“In terms of the fuel supply, you will see that there has been a considerable improvement in the past few days owing to improved supply,” Mazambani said.
He said while he was not in a position to provide the actual quantity of fuel in the bonded warehouses, there were huge stocks of the product that are fully utilised by traders.
The bonded warehouses also supply fuel to Zambia and Democratic Republic of Congo (DRC).
“It’s not our fuel but it belongs to traders. There is adequate supply of fuel but it is paid through the Reserve Bank of Zimbabwe. However, as a country, we are experiencing foreign currency shortages in all sectors. The foreign currency is limited across the board as you can see that we also now require foreign currency to import maize,” he said.
According to Mazambani, on a daily basis the country requires two million litres of petrol and three million litres of diesel, which translates to about US$35 million per week.
Zimbabwe is currently a net importer due to a number of production companies that have shut down over the years.
With the country importing more than it is exporting, it requires almost US$500 million every month to meet its import bill.
The bill includes importation of grain, fuel, wheat and other items.
Though the process of supplying fuel and distributing it, was very clear, observers have argued that the sector was captured by cartels, who were monopolising the buying and selling of the product and smuggling it out of the country where it fetches a higher purchase price.

 

Fuel prices in Zimbabwe, which are less than US$1 using the black market rates, are arguably the lowest in the region.
In January this year, at least 42 local fuel companies were asked to explain their dealings as the Zimbabwe Anti-Corruption Commission (Zacc), sought to investigate the smuggling of the precious liquid from Zimbabwe to other regional countries like Zambia and the DRC.
The cartels are reportedly importing fuel from Mozambique at prices in the region of US50 cents per litre before taking it to neighbouring countries using forged export documents.
On its part, government said the logistical issues, in terms of payment of the fuel from the bonded warehouses, was a prerequisite of the RBZ, which was however, facing foreign currency shortages.
Energy deputy minister Magna Mudyiwa said the country had enough stocks of the product.
“We are just a ministry responsible for ensuring the fuel is available but we have other stakeholders. So the issue of payment of the fuel is beyond our control.
“You can speak to the RBZ and the ministry of Finance on the issue of payments. What we know is that we have enough fuel in our depots,” Mudyiwa said.
The RBZ governor John Mangudya told the Daily News on Sunday that the fuel situation was going to improve after they have addressed some of the crucial issues that will enable the country to import more fuel.
“Yes the situation is going to improve as we have attended to the confirmation of the Letters of Credit (LCs) that were needed for the upliftment of fuel,” Mangudya said in a terse response.
Due to foreign currency shortages, the majority of companies are currently dependent on L Cs for critical imports such as fuel, raw materials and equipment, which are required to keep production going.
RBZ has been allocating foreign currency through L Cs to local companies for the settlement of their foreign debts including the importation of various products.
The country has all along been selling fuel in the local currency after the country adopted a mono-currency system in June last year through Statutory Instrument 142 of 2019.
This saw the Zimbabwe dollar being restored as the only legal tender after a 10-year ban due to hyperinflation which ravaged the local currency.
However, in a bid to improve the supplies and deal with fuel smuggling, the Reserve Bank of Zimbabwe (RBZ) last week instructed Zera to register all fuel service stations that had free funds to import fuel and sell the product in foreign currency.
The public condemned the move, claiming the decision taken by the central bank was unfair because people were being paid their salaries using the local currency and would not afford to buy the fuel.
However, Mangudya defended the licensing of the service stations to sale fuel in foreign currency, arguing that it would actually lessen the burden on the fiscus.
“Fuel is not a central bank issue. We were simply implementing Statutory Instrument (SI) 212 of 2019 issued in September last year which is clear to the effect that fuel is to be paid in foreign currency.
“The advantage is that we cut the import bill which is $500 million per month. Forty percent of which has been going to the fuel imports will go to the interbank.
“We are borrowing to import and we can’t be borrowing money that is available in Zimbabwe,” Mangudya told Parliament’s budget committee recently.
Fuel was being sold in foreign currency at some undesignated service stations at a price between US$1,25 and US$1,50 per litre.

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