By Andrew Lampard
Zimbabwe has been experiencing fuel challenges for the past two years notwithstanding the huge foreign exchange allocations by the central bank, which average around US$80 million per month, including letters of credit.
With the landed price for fuel being around 50 cents per litre, this means that about 160 million litres of fuel is imported per month.
The continued shortages of fuel characterised by fuel queues, however, point to the existence of leakages in the fuel industry, with speculation that either not all fuel finds its way to Zimbabwe or some of the fuel is smuggled out of the country and sold in neighbouring countries.
It is also possible that this has become a source of externalisation by some fuel players.
The above suspicions seem to be corroborated by the Minister of Energy and Power Development, Fortune Chasi, who upon his appointment vowed to end fuel hoarding and other corrupt practices dogging the energy sector as well as empowering the Zimbabwe Energy Regulatory Authority (ZERA) to take full charge of the sector and tightly monitor activities to restore order in the energy sector.
In this regard, the Minister promised to ensure that “… ZERA … take charge of the industry in accordance with what their founding statute requires them to do. We intend to empower them in terms of their monitoring functions.”
Is ZERA doing enough to monitor the fuel industry and deal with all malpractices? Did the Minister take action with regards to the promises he made upon his appointment?
The Ministry should be in a position to scientifically determine national consumption on a monthly and annual basis and possibly daily. Such information would then guide fuel imports and the budgetary allocations thereof.
I believe the Ministry of Energy is free to engage consultants to assist them in undertaking this noble exercise, which will have far-reaching implications on our foreign exchange position.
The fuel bill constitute the country’s largest import bill exceeding US$1 billion per year and it is in the national interest to ensure that the scarce foreign exchange is utilised for intended purpose and that all the imported product is accounted for domestically.
In addition, the Minister at some point indicated the need to have a tracker system to monitor the movement of trucks that would have loaded fuel from the Msasa depot. All this points to some admission on the part of the authorities that all is not well in the sector.
Curbing these malpractices cannot be done by the Reserve Bank of Zimbabwe (RBZ) alone but close cooperation of various government departs and institutions, including ZERA whose inspectors are said to be colluding with petroleum oil companies to “beat the system”.
Public statements being issued by the central bank in terms of fuel facilities show that at least US$20 million is allocated on a weekly basis. There is, therefore, no real basis for the current elevated fuel shortages being experienced in the economy.
The central bank needs to be commended for this transparency approach in terms of foreign exchange allocations, it is now incumbent upon the respective oil companies to deliver whilst responsible government departments, among them ZERA, take action to curb any form of corruption.
It is expected that other Government arms, especially ZERA, the National Economic Conduct Inspectorate (NECI), the Zimbabwe Anti-Corruption Commission, the Zimbabwe Republic Police (ZRP), among others, step up their efforts to bring sanity in this sector.
Notwithstanding the inadequate amounts being allocated, the shortages being experienced in the market are not commensurate with the amount of resources being availed.
Given the erosion of salaries and the increase in price of fuel over the past year, one would naturally expect demand to decline in line with the price increases.
Once again, the impact of the price increases is not being seen in the market. There should have been some improvement in the supply situation in the market.
In addition to the price effect, the contraction in economic activity should also be reflected in demand for fuel.
Naturally, fuel consumption should be aligned to contraction in economic activity. Simply focusing on the allocation of foreign exchange alone is not enough to solve deeply seated corrupt activities in this sector.
It doesn’t matter how much more the RBZ allocates for fuel procurement, the public may continue to suffer at the benefit of a few.
All efforts to increase allocations (cash and use of letters of credit) and alignment of domestic prices have not sustainably yielded the desired results thus pointing to serious leakages, which the authorities, through various government arms, should investigate and resolve the persisting fuel shortages.
Fuel shortages are resulting in loss of productive time as employees spent time in queues. Given Zimbabwe’s low levels of productivity, it is unacceptable that the country continue to lose productive time.
The shortages have also created room for arbitrage and rent seeking behaviour as fuel attendants in connivance with other dealers are now hoarding the product at the expense of the general public.
Noticeable improvements have been observed in the supply of electricity and these should improve further as water inflows into Kariba Dam increase and other power plants come on board soon.
However, the situation remains bad for fuel supplies and its high time government steps up its monitoring systems and ensure that more time is spend on productive activities.
Andrew Lampard is a retired banker who worked in Zimbabwe and South Africa. For views and comments e-mail to firstname.lastname@example.org