News / National
Mutsvangwa blames 'Queen Bee' for high fuel prices
14 Apr 2019 at 10:12hrs | Views
Trafigura, the global commodities trader, is facing accusations that it used a partner's connections to Zanu-PF to gain an unfair advantage in the supply of fuel to the southern African nation.
The Swiss-based trader is alleged to have benefited from favourable terms that its partner, Sakunda, enjoys over the use of a vital state-owned pipeline that supplies most of
the country's fuel needs.
Trafigura, which is a big supplier of fuel to Zimbabwe, has been criticised by politicians in both the ruling Zanu-PF of President Emmerson Mnangagwa and the main opposition.
Trafigura and rival trading houses operating in Africa and elsewhere are under scrutiny over how they use local intermediaries such as Sakunda to strike deals in politically fraught markets such as Zimbabwe.
The industry is "under a bit of a microscope" over the practice, Jeremy Weir, Trafigura's chief executive, conceded in March.
The pipeline in question runs from Mozambique's port of Beira to the landlocked Zimbabwean capital, Harare.
Christopher Mutsvangwa, a senior Zanu-PF figure, claimed Sakunda's influence over it was secured in a way that he described as being akin to "state capture" - using a term that refers to profit-seeking private interests gaining influence over state institutions.
The alleged benefits include inflated prices for fuel delivered through the pipeline at a time when a dire shortage of US dollars means the country is struggling to pay for imports.
Trafigura denies the accusations.
"Trafigura pays in advance for pipeline utilisation like every other trader. We are not given priority or any other special treatment. . . the fuel we import is sold at the price publicly set by the government regulator," a spokesperson said.
The accusations are politically charged. Zimbabwe is struggling to emerge from years of economic misrule by Robert Mugabe, the leader deposed in 2017 by generals favouring his
former deputy Mnangagwa.
Severe cash shortages and long queues outside petrol stations are undermining Mnangagwa's signature promise to make Zimbabwe "open for business" through investment-friendly policies.
In January, security forces brutally suppressed protests over the fuel shortages.
Mnangagwa's government has since started a risky reform programme to tackle a longstanding currency crisis.
But Zimbabwe's opposition has said that reforms are being undermined by vested interests.
Tendai Biti, a former Finance minister and a senior leader in the opposition Movement for Democratic Change, claimed that the government was beholden to Trafigura because "they
control the pipeline".
"They are right now buying fuel from Trafigura . . . why should Zimbabwe buy fuel from a middleman?" said Biti, referring to Sakunda and Trafigura.
Sakunda, which has a joint venture with Trafigura in Zimbabwe, is headed by Kudakwashe Tagwirei, a businessman with clout in Zanu-PF.
Tagwirei is popularly known as "Queen Bee" because of his perceived influence over critical levers of the economy such as access to US dollars.
Sakunda and Tagwirei did not respond to a request for comment.
Trafigura owns 49%of the joint venture with Sakunda, which is called Trafigura Zimbabwe.
Trafigura has become an important lender to Zimbabwe. Like other traders, it has advanced fuel on credit to the government.
"The use of the pipeline and fuel supplied is part of a competitively priced credit arrangement which is repaid over time after delivery," a Trafigura spokesperson said.
Zimbabwe's Energy minister, Joram Gumbo, has denied that Sakunda has a monopoly over the pipeline.
Rival traders to Trafigura such as Glencore also supply Zimbabwe through the pipeline, which is currently operating below its maximum capacity of 180 million litres a month.
Trafigura said the group currently uses less than a third of the pipeline's capacity.
Sakunda has financed refurbishments of infrastructure such as storage associated with the pipeline, which is operated by Zimbabwe's national oil company.
Mutsvangwa claimed that "a political cartel" under Mugabe had favoured Sakunda and given it "pride of place" in the pipeline.
"It happened before my eyes and ears," said Mutsvangwa, who was a cabinet minister in Mugabe's final years of rule.
Mutsvangwa is also a close ally of Mnangagwa.
Sakunda, he alleged, was only "the local comrade or face" for Trafigura, on which he placed most blame for high prices.
Traders and analysts said importing fuel into Zimbabwe might be expected to carry a premium in a region not well served by refineries.
But they added that prices for fuel delivered to the pipeline still looked high.
Diesel fuel imported to Zimbabwe generally contains more sulphur than permitted in Europe or North America.
But the pipeline product has been priced at a level similar to or higher than wholesale price benchmarks in New York and London.
Eddie Cross, an economist and former opposition MP in Zimbabwe, said the pricing was not justified.
He said a lot of the price was premium "generated" by the current arrangement. "Every cent [per litre] represents about $1m-$2m. We're not talking peanuts here," Cross added
The Swiss-based trader is alleged to have benefited from favourable terms that its partner, Sakunda, enjoys over the use of a vital state-owned pipeline that supplies most of
the country's fuel needs.
Trafigura, which is a big supplier of fuel to Zimbabwe, has been criticised by politicians in both the ruling Zanu-PF of President Emmerson Mnangagwa and the main opposition.
Trafigura and rival trading houses operating in Africa and elsewhere are under scrutiny over how they use local intermediaries such as Sakunda to strike deals in politically fraught markets such as Zimbabwe.
The industry is "under a bit of a microscope" over the practice, Jeremy Weir, Trafigura's chief executive, conceded in March.
The pipeline in question runs from Mozambique's port of Beira to the landlocked Zimbabwean capital, Harare.
Christopher Mutsvangwa, a senior Zanu-PF figure, claimed Sakunda's influence over it was secured in a way that he described as being akin to "state capture" - using a term that refers to profit-seeking private interests gaining influence over state institutions.
The alleged benefits include inflated prices for fuel delivered through the pipeline at a time when a dire shortage of US dollars means the country is struggling to pay for imports.
Trafigura denies the accusations.
"Trafigura pays in advance for pipeline utilisation like every other trader. We are not given priority or any other special treatment. . . the fuel we import is sold at the price publicly set by the government regulator," a spokesperson said.
The accusations are politically charged. Zimbabwe is struggling to emerge from years of economic misrule by Robert Mugabe, the leader deposed in 2017 by generals favouring his
former deputy Mnangagwa.
Severe cash shortages and long queues outside petrol stations are undermining Mnangagwa's signature promise to make Zimbabwe "open for business" through investment-friendly policies.
In January, security forces brutally suppressed protests over the fuel shortages.
Mnangagwa's government has since started a risky reform programme to tackle a longstanding currency crisis.
But Zimbabwe's opposition has said that reforms are being undermined by vested interests.
Tendai Biti, a former Finance minister and a senior leader in the opposition Movement for Democratic Change, claimed that the government was beholden to Trafigura because "they
control the pipeline".
"They are right now buying fuel from Trafigura . . . why should Zimbabwe buy fuel from a middleman?" said Biti, referring to Sakunda and Trafigura.
Sakunda, which has a joint venture with Trafigura in Zimbabwe, is headed by Kudakwashe Tagwirei, a businessman with clout in Zanu-PF.
Tagwirei is popularly known as "Queen Bee" because of his perceived influence over critical levers of the economy such as access to US dollars.
Trafigura owns 49%of the joint venture with Sakunda, which is called Trafigura Zimbabwe.
Trafigura has become an important lender to Zimbabwe. Like other traders, it has advanced fuel on credit to the government.
"The use of the pipeline and fuel supplied is part of a competitively priced credit arrangement which is repaid over time after delivery," a Trafigura spokesperson said.
Zimbabwe's Energy minister, Joram Gumbo, has denied that Sakunda has a monopoly over the pipeline.
Rival traders to Trafigura such as Glencore also supply Zimbabwe through the pipeline, which is currently operating below its maximum capacity of 180 million litres a month.
Trafigura said the group currently uses less than a third of the pipeline's capacity.
Sakunda has financed refurbishments of infrastructure such as storage associated with the pipeline, which is operated by Zimbabwe's national oil company.
Mutsvangwa claimed that "a political cartel" under Mugabe had favoured Sakunda and given it "pride of place" in the pipeline.
"It happened before my eyes and ears," said Mutsvangwa, who was a cabinet minister in Mugabe's final years of rule.
Mutsvangwa is also a close ally of Mnangagwa.
Sakunda, he alleged, was only "the local comrade or face" for Trafigura, on which he placed most blame for high prices.
Traders and analysts said importing fuel into Zimbabwe might be expected to carry a premium in a region not well served by refineries.
But they added that prices for fuel delivered to the pipeline still looked high.
Diesel fuel imported to Zimbabwe generally contains more sulphur than permitted in Europe or North America.
But the pipeline product has been priced at a level similar to or higher than wholesale price benchmarks in New York and London.
Eddie Cross, an economist and former opposition MP in Zimbabwe, said the pricing was not justified.
He said a lot of the price was premium "generated" by the current arrangement. "Every cent [per litre] represents about $1m-$2m. We're not talking peanuts here," Cross added
Source - Financial Times
