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French fuel deal is not enough’

THE state-run National Oil Company of Zimbabwe (Noczim) is the only company that is getting foreign currency to import fuel. But is that fuel enough for the country? Is the foreign currency enough? To whom is the company selling fuel? Are the newly gazetted prices of $320 per litre for di

esel and $335 for petrol enough for Noczim to break even?  Noczim marketing and distribution director Krispen Mashange this week spoke to SHAKEMAN MUGARI about these and other issues. 

Mugari: Noczim has started receiving fuel under the recent French deal. Can you tell us how much the company has received so far?

Mashange: The latest purchase is about 25,7 million litres of fuel. However, so far we have got 17,2 million that has been delivered.

Mugari: That is clearly not enough for the whole country?

Mashange: Yes, it’s not enough to go round. In real terms that would be enough to last us about seven days because the whole country needs 2,5 million litres of diesel and two million litres of petrol per day. That means per month we will need 90 million litres of diesel and 60 million litres of petrol. So, yes, it’s not enough. 

Mugari: So how are you distributing per day?

Mashange: We are giving out 600 000 litres of diesel and 50 000 petrol.

Mugari: There doesn’t seem to be an improvement in the supply of fuel. It remains a critical situation. Can you tell us who are getting this fuel that you say you are distributing?

Mashange: It’s mainly going to farmers, government, parastatals, public transport providers and the public.

Mugari: Can we have a breakdown of how much each of them is getting of the fuel that Noczim is releasing every day?

Mashange: About 40% is going to farmers, 18% government, public transporters are getting 10%, the public is getting 16% and the rest is going to the commercial sector where we target companies like bakeries.

Mugari: Does the new fuel price allow you to break even?

Mashange: The prices that government has announced are enough for us to sell at a profit. It’s sustainable at the moment. We are happy with it.

Mugari: You mean at the current prices Noczim will not sink further into the debt that it has been in for some years now? As far as people know, this company is heavily in debt because of previous uneconomic fuel prices.

Mashange: For as long as we are getting the foreign currency from the RBZ and all things remain constant, we believe we will make a profit at the new prices. We as a company have never come out in the open to talk about our debts. Our profitability hinges on the foreign currency.

Mugari: But in the past events have moved so fast that your prices are overtaken by events. If history is anything to go by, very soon these prices will be sub-economic. For instance, you spent the past 12 months selling fuel at ridiculously low prices that almost drove you into bankruptcy. What will you do if that happens?

Mashange: We will start eating into our previous profits in order to survive. That’s how we have done it. When the prices are right we make profits and then when they become sub-economic we go into our profits. When the prices are adjusted we will start making profits again.

Mugari: From the figure you gave me it shows clearly that Noczim does not have enough fuel to go round. Who is filling the gap?

Mashange: It’s private companies buying fuel from outside under the foreign direct import (scheme). Then there are people in the diaspora bringing in fuel for their relatives and of course there are companies getting foreign currency on the black market and selling the fuel at those parallel market prices which are way above what government has approved.

Mugari: There has been an outcry in the past that farmers are getting fuel from Noczim at cheap prices and then selling it on the parallel market. What has changed this time? 

Mashange: We have tried to make it safe by involving the police. We have designed a form that the farmer has
to complete and his request would be authenticated by the police.

We also require an offer letter and title deeds from the farmer before we allocate the fuel. They (farmers) also need approval from the Ministry of Energy.

Mugari: But that will not stop the corruption. The police and the farmer can always connive?

Mashange: It should work. I am sure it will because we have a taskforce made up of the army, provincial governors and the President’s Office?

Mugari: What will the provincial governors do to stop the corruption?

Mashange: We will liaise with them to verify whether the fuel that the farmer has requested is in line with the hecterage that he has. They will also give us feedback to prove that indeed the fuel was used for that purpose.  

Mugari: But the difference between the fuel price on the official and the parallel market remains tempting for farmers who want to make quick money.

Mashange: That could be the case but you should realise that the amounts involved this time are huge. You need a lot of money to buy fuel at the current prices.

Zimbabwe fuel crisis timeline

SINCE the start of Zimbabwe’s fuel crisis the government has signed some desperate deals to try and solve the problem. Most of the deals have collapsed. There were other ad-hoc policy measures that dismally failed as well.  Below are some of the deals that Zimbabwe has entered into since 1999 and measures it tried to implement. 

2000: Kuwait-based Independent Petroleum Group (IPG) announces it is considering investing in Zimbabwe’s downstream oil industry after renewing a two-year oil supply deal with the country.

IPG extends the deal to supply oil to Zimbabwe by two years. The deal is signed during a visit to Kuwait by (then) Mines and Energy minister Sydney Sekeramai and a delegation from the National Oil Company of Zimbabwe (Noczim). The arrangements however fail to solve the problem and collapse following Zimbabwe’s repeated failure to pay due to foreign currency shortages.

July 2001: The government signs a US$360 million deal with Libya. As part of the deal, Zimbabwe is to export products to the Arab country. The short-lived Libyan fuel deal is reportedly mothballed amid revelations that the government had illegally availed itself of IPG fuel and had built up a US$18 million debt three months after the signing.

The cost of the fuel from Libya is being paid through the Commercial Bank of Zimbabwe.
Libyan suppliers are considered as secondary sources of the commodity as there are no real benefits from the Libyan arrangement. The Libyan fuel is said to be more expensive than what IPG was charging by 18%.

The Libyan suppliers are said to have put a premium on the price because of Zimbabwe’s poor creditworthiness and their being prepared to bring fuel all the way to the Msasa holding tanks without being paid.

The tenets of the deals between Zimbabwe and Libya are always shrouded in secrecy. Despite the deals not improving the fuel situation in the country, Zimbabwe keeps the deal with the Libyans open for the purpose of goodwill.

December 2002: The Libyan deal collapses after Zimbabwe’s failure to meet its part of the bargain.

2004 (early): As part of the “Look East” policy, Zimbabwe enters at least 15 deals worth millions of dollars with the Chinese, Iranians and other Asians, mostly on fuel, mining, electricity and communications.

The state media reports that the Asian countries would provide undisclosed amounts of money to the government to import fuel. Nothing materialises from most of the deals.

August 2004: The government deregulates the fuel industry to allow private companies holding foreign currency to import the commodity.

The Reserve Bank accords great priority to fuel procurement through direct allocation of foreign exchange to Noczim and private companies through an auction system. Importation of fuel by oil companies is guaranteed US$4 million per auction, or US$32 million per month.

The same year utilisation of foreign exchange by direct fuel importers (DFIs) from their FCAs, for the importation of fuel, amounts to US$40,2 million.

The Reserve Bank battles for one month with 15 fuel importing companies which fail to account for US$12,4 million worth of foreign exchange allocated to them to import fuel. The country imported fuel amounting to US$413 million. This implies an average of US$34,4 million per month.

August 2004: Reserve Bank governor Gideon Gono announces the introduction of a facility to allow people to buy fuel from selected filling stations in United States dollars.

May  2005: Zimbabwe tries to seal an oil supply deal with Teodoro Obiang Nguema Mbasogo, Equatorial Guinea’s visiting president, to help ease its chronic fuel shortages.

Presidential spokesperson George Charamba tells journalists that Zimbabwe and Equatorial Guinea will use Nguema’s three-day visit to discuss political and security cooperation and possible trade and business deals.

“It is essentially a state visit. It is partly to say thank you to Zimbabwe, and it is partly to look at co-operation,” Charamba says.

“They are an oil-producing country and we are trying to see how we can operationalise some kind of agreement (on fuel supply to Zimbabwe).”

Equatorial Guinea is sub-Saharan Africa’s third largest oil producer. 

However, nothing came of the talks.

April 2006: Gono announces that the RBZ has scrapped the sale of fuel in foreign currency because of rampant abuse.

May 2006: Zimbabwe signs a deal with Kuwait financed by French bank BNP Paribas. August 2006: Zimbabwe receives 25,7 million litres of fuel worth US$15 million under a US$50 million facility signed with BNP Paribas.

Noczim chief executive Zvinechimwe Churu tells the state media that 8,2 million litres of petrol and 17,5 million litres of diesel are being brought in from the Mozambican port city of Beira.

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