FRESH details have emerged that Treasury directed the state-owned National Oil and Infrastructure Company (Noic) to handpick only one firm to supply 720 million litres of fuel over 24 months, in a process which effectively restricted other players from utilising the multi-million-dollar spinning Beira-Harare-Feruka pipeline.
As first reported by the Zimbabwe Independent last week, the battle for the exclusive control, management and use of the pipeline — which pits fuel procurement cartels against each other — costs Zimbabwe a gargantuan US$400 million every month due to the under-utilisation of the infrastructure.
Sakunda Holdings, owned by businessman Kudakwashe Tagwirei, who was this week placed under sanctions by the United States Treasury for public corruption, extended US$17,5 million to Noic under a US$22,5 million loan deal to allow the state enterprise to buy out Lonmin’s 50% stake in the ownership of the strategic Feruka fuel pipeline. The controversial loan transaction leaves Noic, which generates billions of dollars in revenue through levying tariffs from usage of the pipeline, saddled with a US$17,5 million debt to Tagwirei’s Sakunda.
Sakunda, slapped with sanctions by the US this week over its controversial handling of the US$3 billion Command Agriculture programme, among a slew of corruption allegations, enjoys dominant use of the pipeline, riding on Tagwirei’s political capital.
Documents seen by this newspaper in its long-running investigation into the opaque control and use of the lucrative pipeline, show that Treasury secretary George Guvamatanga, through correspondence dated November 4, 2019, wrote to Energy and Power Development secretary Gloria Magombo advising her to flight a tender through Noic for the purposes of enlisting a single player who could procure 30 million litres of fuel over a period of 24 months.
It reads: “Treasury has noted with concern the proliferation of unsolicited bids for bulk fuel supply. This has made it difficult to identify fuel suppliers in a fair and transparent manner. A decision has been made to rationalise fuel procurement and ensure security of supply.
“Consequently, Treasury requests that you facilitate, through one of your parastatals, the procurement of fuel through tender whose conditions should include the following: 30 million litres of combined product to be delivered each month. The fuel supply tender will be for a tenure of 24 months.”
Among other procurement terms spelt out by Treasury stated that the winning firm would be stipulated to “contribute 4,5 million litres to dead stock in the pipeline”.
The winning bidder, as part of the tender terms, “must be willing to provide fuel against a letter of credit (LC) of at least 180 days”. The LC would be 50% confirmed by an international bank while the remainder would not be confirmed.
Guvamatanga’s letter was also copied to Finance minister Mthuli Ncube and cabinet secretary Misheck Sibanda.
The Treasury secretary this week did not respond to questions from the Independent on the terms of the 30-million-litre fuel procurement tender and whether it did not disadvantage other players while favouring dominant suppliers like Sakunda, among other inquiries posed this week. He referred all questions to the Ministry of Energy.
“Your questions are best dealt with by the Ministry of Energy and Power Development who are the procurers and directly involved in the day-to-day management of the processes and contracts through Noic,” he said.
In yet another letter to Noic chief executive officer Wilfred Matukeni, Magombo advised the entity to exclusively enlist a single player who could procure the fuel for the government by November 1.
“As you are aware, the Ministry and Noic have been receiving numerous unsolicited bids for bulk fuel supply making it difficult to objectively select a single reliable supplier.
“Consequently, there is need to put in place a transparent and fair method of identifying a fuel supplier in line with tenets of public procurement. Pursuant to the above you are requested to flight a tender and thereafter, contract a fuel supplier on the terms and conditions stipulated below. Pre-pay for the pipeline tariffs for the duration of the contract for a period of 24 months …”
Matukeni, who was unreachable for comment on questions from this newspaper as to why Noic settled on receiving a loan to buy out Lonmin’s stake in the pipeline, also did not respond to inquiries on the identity of firms which submitted bids for the tender notice.
Although the Independent understands the tender was awarded to one of the politically connected companies, Matukeni would not disclose the winning entity.
Magombo, who committed to respond only to “policy-related” questions while referring the other inquiries to Noic, had not responded at the time of going to print.
Zimbabwe, in the throes of an economic meltdown, is battling to meet fuel requirements.
The government’s plan to construct a second pipeline that runs from Mozambique into Zimbabwe and feeding the whole sub-region with South African company Mogs at a cost of US$400 million has suffered a stillbirth as a result of fierce resistance from powerful cartels with strong political connections. The second pipeline, touted to transform Zimbabwe into a regional petroleum hub, was to be built at a cost of US$400 million.
Trafigura, which until March was Tagwirei’s partner in Trafigura Zimbabwe, moved 717 million litres of fuel through the pipeline in 2016, with volumes soaring to 639 million litres in 2017 and 768 million litres in 2018. In 2019, it pumped 889 million litres into Zimbabwe.
The country requires 4,1 million litres of diesel and 3,1 million litres of petrol to satisfy daily requirements.