GOVERNMENT says it is to begin suspending and punishing several oil firms named in a “comprehensive” list of companies abusing foreign currency obtained from the Reserve Bank of Zimbabwe (RBZ)’s forex auction system, following a crack investigation.
However, minutes of last week’s post-Cabinet meeting, which revealed the plan, did not say which oil firms had been caught up in the scandals.
But central bank governor John Mangudya told businessdigest that five of the country’s biggest petroleum firms were trading above board.
These include the State-run Petrotrade, Genesis, Total, Engen and Zuva, which he said were pumping Zimbabwe dollars indexed fuel into the market every time they are allotted foreign currency at the auction system.
The central bank chief said between 25% and 30% of fuel on the market was being sold in Zimbabwe dollars.
Up to 70% of petrol and diesel is imported by private players under the Direct Fuel Import (DFI) scheme, whereby they use free funds to bring the fuel.
This product is legally sold in United States dollars. But under a strategy that came into force since the introduction of the foreign currency auction system in 2020, petroleum firms accessing forex from the RBZ are compelled to sell in Zimbabwe dollars.
However, consumers have claimed that they have been short-changed by oil firms accessing the cheaper RBZ forex, before selling fuel in United States dollars.
The RBZ governor had earlier told businessdigest that a crack investigation was underway to fish out bad apples.
Cabinet said pressure was mounting on transgressors, although some analysts doubted the government would take action.
“Cabinet was furnished with a comprehensive list of the companies and retail outlets abusing the foreign currency facility, and directed that firm action be instituted against the unscrupulous traders,” the minutes noted.
“The action involves prosecution of offenders, cancellation of fuel trading licences, or a heavy fine as shall be determined by the team of relevant line ministries in conjunction with the Reserve Bank of Zimbabwe as the source of the funds so abused,” the minutes noted.
In his interface with business leaders and economists during a panel discussion organised by this publication,
Mangudya said; “About 25% to 30% of our fuel is sold in local currency and 70% to 75% in foreign currency. The fact that you are not seeing Zimbabwe dollar fuel does not mean it does not exist. It is there. The major fuel operators that sell fuel in Zimbabwe dollars are the major oil companies.
“These include Petrotrade, Genesis, Total, Engen and Zuva. Whenever they get foreign currency from the central bank (they sell in Zimbabwe dollars)”.
But in interviews with businessdigest, market watchers doubted Cabinet’s determination to punish well-connected networks of the delinquent oil firms, some of them controlled by ruling elites.
“I think Cabinet should really address the underlying challenges, which point to some inefficiencies in the auction system and speculative tendencies created by the dual pricing of fuel,” said economist Clemence Machadu.
“There is a triangular challenge with three dimensions. The first is the consumer’s side, where the availability of fuel in local currency creates high demand as the fuel is cheaper compared to the one sold in forex under the DFI facility. So motorists buy more than they need. Even consumers with the greenback first change their forex on the black market and buy the local currency fuel, exerting too much demand that is not sustainable,” Machadu told businessdigest.
He said fuel retailers were also worried that if they sold in Zimbabwe dollars, they might fail to access forex from the auction for more imports.
The foreign currency auction system has been struggling to meet demand for United States dollars allotted to importers.
Economist Victor Bhoroma said an efficient exchange market would close all forms of arbitrage and corruption.
“What we recommend is that companies licensed to sell petroleum under DFI licenses should not be considered for foreign currency allocations as that will be double dipping,” he said.
The country requires about 130 million litres of fuel per month, according to central bank data.