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Zimbabwe 'losing fuel' to forex-rich neighbours

by Staff reporter
15 Mar 2019 at 08:42hrs | Views
Zimbabwe could be losing millions of litres of fuel to neighbouring countries under its bonded warehouse scheme because the government is failing to mobilise foreign currency to pay for the commodity on time.

Business Times can report that fuel being stored at the Msasa storage facility is being bought by regional countries, which have huge forex reserves and lines of credit.

Energy Minister Joram Gumbo confirmed that the recurrence of fuel shortages and queues in Zimbabwe is because neighbouring countries are buying fuel from Msasa.

According to him: "The fuel is being imported from the Middle East countries and deposited at the Msasa fuel storage facilities, and meant for industrial use. But before we are able to access the fuel, some neighbouring countries will move in and buy it in huge volumes as our companies are struggling to raise the forex to buy the commodity."

Gumbo went on: "In the past months, trucks from Botswana and the Democratic Republic of Congo have been coming to the country and buying our fuel in bulk, leaving the country with not enough fuel."

The minister said fuel companies in the Middle East now want to be paid upfront and Zimbabwe has been failing to raise the money due to problems in accessing letters of credit and the lack of forex by local oil companies.

"The letters of credit are taking time to be processed by our banks, creating gaps in the supply and distribution of fuel, and resulting in foreign countries coming in with money to purchase the product," Gumbo said.

He disclosed that in January, the government paid US$91.9m for 150 million litres, and in February the government paid US$80.6m for 135 million litres. But only 104 million litres were delivered for both months, leaving a gap which caused the shortages.

"The Letters of Credit go to three different banks and the third bank then advises the supplier that the fuel has been paid for and that it should be released by the National Oil and Infrastructure Company from Msasa, where the fuel will be bonded," Gumbo explained.

"Foreign countries are capitalising on the forex challenges in Zimbabwe, and when I announce that there is fuel in the country, it will be based on the facts that it will be bonded in Msasa waiting to be released into our market."

The acute foreign currency shortages have scuttled the extension of tenure of two fuel supply facilities with Trafigura Beheer and Independent Petroleum Group (IPG).

Last year, Trafigura and IPG sealed a deal to extend payment periods for fuel supplies to Zimbabwe from 30 days to 180 days, but Gumbo says the new arrangement could not take off due to foreign currency shortages.

"We have negotiated with Trafigura and IPG, those facilities are still standing [but] we have had a problem of foreign currency shortages," Gumbo explained. "When the [credit] facilities were running, the demand also shot up and it would not match. The facilities are still on, they have not been revoked. IPG and Trafigura continue to supply us," Gumbo said, adding that the two companies supply about 32 million litres of fuel per week.

Other companies such as Engen, Total, Praise Petroleum, and Strauss Logistics are supplying about 13 million litres per week.

Source - businesstimes