Eric Bloch: The disastrous impact of fuel crisis

By Eric Bloch

MEDIA reports last week claimed that the National Oil Company of Zimbabwe (Noczim) had had their entire cash resources seized by the Zimbabwe Revenue Authority (Zimra) due to default in payment of fuel importation duties and other imposts.

The reports stated that, with the seizure of its funds, Noczim was unable to effect payment for the petroleum which it had purchased, which petroleum was in tanks at Beira, in Mozambique, pending forwarding to Zimbabwe through the Beira Corridor pipeline.  As a result, the reports said, a fuel shortage in Zimbabwe was imminent, with a major scarcity already prevailing in Harare.

Zimbabwe is not unaccustomed to fuel shortages, and most of the populace will readily recall the many hours, and days, expended in very long queues at all the country’s filling stations, awaiting arrival of critically needed fuel supplies.  The economic impact was great; there was loss of thousands of working hours with concomitant minimal availability of public transport services. Commerce and industry were unable to transport manufacturing inputs and operational requirements and to deliver goods from factories to wholesalers and retailers, as well as innumerable other transportation needs essential to any economy.

With the already operationally-emaciated Noczim likely to be wholly inert, a calamitous recurrence of those disastrous economic circumstances is almost a certainty, already (within days of Zimra’s seizure of Noczim’s funds) beginning to evidence itself.

Bearing in mind that Noczim is a government parastatal, and that Zimra is government’s revenue collection vehicle, it is wholly attributable to government that, once again, the greatly embattled economy is to be further weakened.

Zimra cannot be condemned for taking actions incumbent upon it to ensure receipt of revenues due to — and greatly needed by — the state. Noczim is the indisputable culprit for the consequences of its defaults in effecting payments of such revenues, but nevertheless the onus is upon government to act speedily to minimise, and thereafter avoid, the decimation of the economy which is an inevitable consequence of insufficient, and belated, supply of the nation’s essential petroleum requirements.

Failure to do so will not only grievously retard the working of the wheels of the economy, but will also have the by-product effects of diminishing government’s other revenue flows from the economy, as well as markedly further diminishing the already pronouncedly low levels of business confidence and national morale.

As an immediate, first remedial measure, government needs to advance to Noczim a loan to enable it forthwith to resume sufficient of fuel imports (to all intents and purposes, loaning to Noczim the very funds of which it was dispossessed).  However, that is only a transitional and very necessary governmental action for whilst it will temporarily address the looming crisis, it will not resolve the underlying core Noczim deficiencies (common to most parastatals) of great undercapitalisation, and extreme mismanagement of resources.

Government has an intense, paranoid belief that it must have absolute control of anything and everything, and hence its recurrent resistance to the privatisation of parastatals, wholly or partially, despite more than 20 years of declared intentions to do so. Exceptionally, however, it did recently divest itself of Zimbabwe Iron and Steel Company, but that is only one of the more than 40 parastatals of which government is possessed. Recently, government has vociferously contended that it now intends to vigorously pursue privatisations, but that intent has yet to be demonstrated. 

With the impending fuel crisis, one of the first privatisations that must be pursued with great haste is that of Noczim, not only because of the imminent crisis, but also because for years it has been incontrovertibly evident that Noczim fulfills no functions that cannot more effectively and beneficially be pursued by the private sector, as is the case in the majority of the world’s economies.

Admittedly, Noczim fulfilled a valuable purpose at a time when Zimbabwe was confronted by major international trade sanctions impeding the purchase and importation of petroleum, but that ceased when Zimbabwe became independent in 1980.  Now, the economic role of Noczim can be wholly, and more effectively, addressed by international and domestic fuel companies, of which there are very many with proven track records of successful and economically-effective operations. 

As an immediate step, after temporarily funding Noczim’s importation of the fuel awaiting inflow to Zimbabwe from Beira, and any fuel enroute to Beira from international fuel-supplying countries, government needs to empower any private sector enterprises that wish to import and distribute petroleum products to do so. 

Naturally, such enterprises must be compliant with all normal importation formalities and procedures, including timeous payment of all governmental imposts.

Thereafter, government should speedily divest itself of ownership and control of Noczim, or in the alternative should initiate the dissolution of that entity, with disposal to the private sector of its infrastructure and all its operations.

If government does not very rapidly fund Noczim’s immediate fuel importations, and then speedily privatise or wind-up Noczim —with concurrent enablement of private sector assumption of Noczim’s operations and functions — the presently weak economy will be so massively further weakened as to be on the verge of extinction. 

Concurrently, the only fuel availability will, once again, be in illegal black markets, at immense costs, occasioning yet another massive surge in economy-debilitating inflation. 

That, in turn, will intensify the already extensive poverty and suffering which is the burden of the majority of Zimbabweans. A looming, almost immediate, massive fuel crisis is about to confront Zimbabwe, unless government immediately acts constructively and dynamically.

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