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Structural issues to blame for fuel situation | The Sunday Mail

Structural issues to blame for fuel situation

24 Feb, 2019 - 00:02 0 Views
Structural issues to  blame for fuel situation

The Sunday Mail

Emmanuel Kafe

The local fuel market is experiencing supply challenges at service stations, a development that has resulted in some retailers running for some days without the commodity yet the country has enough reserves.

Day-to-day consumption of both diesel and petrol in Zimbabwe rose by 342 percent and 650 percent respectively between April and October 2018, putting Government under huge pressure to provide adequate foreign currency to pay for the commodity, according the Ministry of Energy and Power Development.

Petrol consumption leapt from one million litres per day to about 7,6 million litres per day, reflecting a 650 percent increase while consumption of diesel rose from 1,9 million litres per day to about 7,6 million litres daily, a weighty 342 percent jump.

As a fuel importer, the country needs foreign currency to pay for the precious commodity, but low export receipts indicate a short supply in hard currency for the imports, especially after the surge in consumption.

A quick survey of Harare fuel stations last week showed that the fuel stations had suffered from intermittent interruptions in the fuel supply chain which led to the sporadic queues.

Economists say the shortages of fuel at some fuel stations is a result of structural problems.

True to this argument, the country has enough fuel at its reserves but there is not enough forex for local companies to access it which has resulted in the intermittent supply of the commodity. Foreign currency shortages being experienced in the country mean that money is not always available to ensure that there are adequate and uninterrupted supplies, leading to alternating availability of the commodity at fuel stations.

The Minister of Energy and Power Development, Dr Joram Gumbo, cleared misconceptions on the supply of fuel and explained the role his ministry has to play in making sure that the country has enough of the liquid commodity.

He explained the processes and procedures of distribution of the commodity to fuel stations and why there are intermittent supply of the valuable liquid.

How is the process managed?

According to the Minister there are enough fuel stocks in the country, but the situation is compounded by foreign currency shortages needed to pay for the commodity from the bonded facility in Msasa.

Government, through the Ministry of Energy and Power Development manages the fuel process which end up at service stations.

Minister Gumbo said his ministry is responsible for the facilitation of bringing fuel into the country and negotiating with suppliers who bring the commodity. The fuel comes into the country in bond and is kept at Msasa and Mabvuku depots, where local companies who own fuel stations need to pay for it.

When it comes through the pipeline it is stored in the fuel tanks at the depot and companies have to queue for forex allocation at the Reserve Bank of Zimbabwe so that they pay the suppliers before being given the fuel.

He said the Reserve Bank of Zimbabwe currently allocates about US$20 million per week towards paying for the fuel imports – accorded the highest priority among many other competing needs. Other critical needs competing with fuel for allocations from the Central Bank of the scarce foreign currency are health, manufacturing and mining sectors.

Explained Minister Gumbo: “Suppliers bring fuel through the pipeline from Beira to Msasa but when the fuel ends in Harare, mostly it’s not all for Zimbabwe.”

He further stressed that most of the bonded fuel goes to Zambia, DRC and Malawi and it’s not all for Zimbabwe but Zimbabwe has enough of its own.

The minister said the oil companies in the country have to pay for the fuel through RTGS and then the fuel is cleared to them and a certificate is released to them to get it from Msasa inland.

Although the fuel industry is not the only one in the country, the President has given priority to the fuel industry to get adequate forex to be able to get enough fuel so that industries keep on working.

“There are facilities that we facilitate, and that is or role, we negotiate with suppliers of fuel, who give facilities which could be 60-90 days to Government and upon expiry of that agreement, a payment has to be made,” said Minister Gumbo.

He said when the Ministry announces  acquiring a certain amount of fuel, it does not mean that every fuel station should would have the commodity as there are other processes to be followed to get the fuel from Msasa. Zimbabwe has a vehicle population of an estimated four million cars, a statistic that has risen over the past few years owing to a spike in importation of second-hand cars.

Figures released by the Ministry of Energy and Power Development show that consumption of diesel and petrol in the first five months of 2018 were roughly similar to those during the same period in 2017.

Consumption of petrol in March 2018 was more than twice the March 2017 level, but that was partly compensated by the January 2018 level which was more than 40 percent below the January 2017 level.

But between June and November consumption rose exponentially each month with diesel peaking in October at 109 percent of the October 2017 level and petrol in September increasing by 126 percent of the 2017 level. Economists argue that fuel consumption in an economy, especially over a short period like a year, mirrors economic growth.

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