Fuel consumption has spiked 24 percent to 752,4 million litres between January and June this year, largely in response to rising economic activity sparked by renewed investor confidence following the coming in of the new dispensation.
Apart from new investments such as Varun Beverages — which is producing Pepsi, Mountain Dew and Mirinda soft drinks — a number of existing companies have also ramped up production in the last nine months.
The surge in business confidence has resulted in high demand for fuel, particularly diesel, and foreign currency, as companies ramp up production.
Industry gobbles 60 percent of diesel in the country.
Since November 24 last year when President Emmerson Mnangagwa was sworn-in following the resignation of former President Mr Robert Mugabe, foreign investor appetite for local opportunities is at an all-time high.
Zimbabwe was struggling to attract high value international investors amid market sentiment that Mr Mugabe’s continued stay in office had imposed a 50 percent risk on investment.
The Indigenisation and Economic Empowerment Act, which demanded that locals hold 51 percent shareholding in all foreign-owned investments, also kept foreign direct investment at bay.
But after President Mnangagwa’s administration tweaked the law to allow foreign investors to hold 100 percent shareholding in their businesses except in the diamond and platinum sectors, high-profile investors such as General Electric from the United States have expressed interest in local investments.
Between January and June this year, the Zimbabwe Investment Authority (ZIA) approved investment applications of a record US$16 billion, a clear indication that the economy has turned the corner.
Increased economic activity has seen the Reserve Bank of Zimbabwe (RBZ) battling to process foreign payments for both fuel and raw materials demanded by industry.
Zimbabwe Energy Regulatory Authority (Zera) chief executive officer Engineer Gloria Magombo told The Sunday Mail Business last week that fuel imports rose 24 percent in the first half of the year.
“Generally, fuel imports into the country have been increasing between 2017 and 2018. Diesel imports increased by 17 percent from 360,7 million litres in 2017, petrol imports increased by 47 percent from 207,6 million litres in 2017 (and) jet A1 imports increased by 24 percent from 27,8 million litres in 2017.
“The overall increase for all the fuels is 24 percent when comparing 2017 and 2018,” said Eng Magombo.
Only paraffin imports decreased by 44 percent from 14,7 million litres in 2017 and this is largely attributed to the shift in energy use patterns as most citizens have moved from using paraffin for heating to gas and electricity.
The jump in fuel imports has resulted in the RBZ increasing foreign currency allocations.
In May, RBZ Governor Dr John Mangudya said fuel imports had chewed US$85 million.
There plans to ramp up allocations to about US$100 million in November to meet demand.
More money is now required for fuel imports considering that crude oil prices have generally been rising from June 2017 to July 2018 from levels of US$46 per barrel to US$78 per barrel in July 2018, representing an almost 70 percent increase.
Industrialists and bankers optimistic
Industrialists and bankers believe there is a ray of hope on the horizon for the economy as the new administration has laid a firm foundation for transformation.
In a statement accompanying Turnall Holdings Limited’s results for the half ended June 30, 2018, board chairperson Mrs Rita Likukuma acknowledged the improvement in economic fortunes.
“The group’s improved financial performance for the period was anchored on increased production and sales volumes,” said Mrs Likukuma.
“Sales volumes of 25 432 tonnes were 63 percent above the previous comparable period. The group experienced strong product demand in the first quarter, which was supported by consistent product supply and affordable prices.
“Production volumes we 29 630 tonnes, which was 79 percent above the previous comparable period.”
However, like any other company, Turnall had foreign currency challenges due to heightened economic activity.
The manufacturing sector is riding high, spurred by Statutory Instrument 64 of 2016, an import restriction policy introduced by the Government to protect local industry.
Mrs Likukuma says SI64 of 2016, which has since been upgraded to SI 122 of 2017, has improved the competitiveness of locally produced goods.
Confederation of Zimbabwe Industries (CZI) president Mr Sifelani Jabangwe last week said local firms will be key to turning around the economy as the nation seeks to achieve middle income status by 2030.
Standard Chartered Bank Zimbabwe board chairman, Mr Lovemore Manatsa also believes that the economy will continue to grow driven high gold, diamonds and tobacco output, despite foreign currency challenges.
The World Bank projects the country’s annual GDP growth at 2,7 percent while the IMF puts it at 2,4 percent while the Ministry of Finance remains more optimistic at 4,5 percent growth.
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