HomeBusiness DigestNoczim to fork out $42 trillion for $6 trillion debt

Noczim to fork out $42 trillion for $6 trillion debt

Paul Nyakazeya

THE beleaguered National Oil Company of Zimbabwe (Noczim) is expected to come on to the market to raise $6 trillion to service debts and raise foreign currency for fuel procurement, businessdigest established this week.

But dealers said the m

ove would put Noczim in a serious debt trap as it would be forced to fork out close to $36 trillion in finance charges at ruling market interest rates, above the principal sum raised through the market.
This would put Noczim’s total debt burden from the loan at a staggering $42 trillion, including the principal loan, they said.

Most major money market instruments are attracting interest rates above 500%.

Sources said Noczim had already approached merchant bank, Syfrets, a subsidiary of the Finhold Group, to structure the deal.

No comment was immediately available from Syfrets yesterday.

Noczim spokesperson, Zvikomborero Sibanda, could not be contacted for comment since Tuesday. Messages left for her were not returned.

But businessdigest understands that the deal is now at an advanced stage of execution, and that Syfrets will lead the team of financial advisors to the deal, the most significant cash-raising initiative by Noczim this year.

Sources indicated that Noczim’s coffers were dry. The government-owned oil procurement company had been selling fuel at significantly low prices, resulting in huge losses that were now bleeding its books.

Government subsidies are understood to have been weakened by a recent salary hike for civil servants and uniformed forces, which was not budgeted for.

The new civil servants’ salaries are expected to push the government wage bill to well over $120 trillion, from $30 trillion government had budgeted for during the year to December 31.

Sources have indicated that government’s budget for 2006 has already been spent, and Finance minister Herbert Murerwa was expected to come up with a supplementary budget any time soon.

As a result, Noczim has been strapped for cash.

In a desperate move aimed at scraping a little bit of cash from available fuel supplies, Noczim last week increased fuel prices to $75 000 and $80 000 per litre for diesel and petrol respectively, from $22 000 and $23 000 per litre for diesel and petrol.

Market prices are currently pegged at between $185 000 and $210 000 per litre for petrol and $180 000 and $200 000 per litre for diesel.

Noczim sells its fuel to government and its departments as well as other quasi-government institutions and operations.

The parastatal also sells fuel to farmers at low prices under a Reserve Bank-supported scheme, as well as to a few selected fuel stations which distribute exclusively to public transport operators.

This has resulted in huge loss for Noczim, whose fuel prices have remained significantly low despite rallying international oil prices.

The low prices for fuel from Noczim have created arbitrage opportunities for many of the beneficiaries of the parastatals’ fuel supplies who divert the scarce commodity to a thriving black market at higher prices.

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