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ZIMBABWE: More fuel deregulation as shortages bite
IRIN News
July 19, 2005

http://www.irinnews.org/report.asp?ReportID=48199

HARARE - Standing for hours by the roadside waiting for a bus, or stranded in a queue outside a petrol station that snakes for several blocks, Zimbabweans are increasingly used to a fuel crisis that has defied the government's efforts to resolve.

The latest stab at the problem was an announcement last week further deregulating procurement and distribution, and throwing the doors open to private business to import and sell fuel at a gazetted price - an admission that the forex-starved authorities have been unable to keep the pumps supplied.

"We have always encouraged this [the involvement of private fuel companies]. In fact, it will help augment the supplies that are being put onto the market for the general public," the official Herald newspaper quoted minister of energy and power development, Mike Nyambuya, as saying.

The new approach does, however, have its critics: Central Bank Governor Gideon Gono called for fewer private companies importing fuel rather than more, and accused some of them of misusing foreign currency allocations.

"Such abuses include diversion of fuel funds, where, for instance, the Reserve Bank of Zimbabwe had to battle for a full month with 15 fuel-importing companies which had failed to account for US $12.4 million worth of foreign exchange allocated to them," Gono said in a monetary policy statement in May.

In the first four months of 2005, the central bank allocated US $50.4 million to private oil companies given the responsibility of importing fuel by means of a "Special Purpose Vehicle". Around 120 companies are licensed to bring in fuel, but Gono wants that whittled down to 20.

Zimbabwe needs around US $750 million a year to cover its fuel bill but, given the economy's steep decline, that figure could be far less, analysts suggest. Previously the state-owned, corruption-tarnished National Oil Company of Zimbabwe held the monopoly on procurement.

Petrol sells for Zim $10,000 per litre and Zim $9,600 for diesel at the official price, and 10 times that rate on the parallel market.

Opposition Movement for Democratic Change legislator Murisi Zwizwai predicted a boom in the parallel market if more companies were allowed to import.

"The black market is going to thrive as a result of the liberalisation of fuel procurement. This defeats Reserve Bank of Zimbabwe Governor Gideon Gono's policies to reign in the black market," he said recently in parliament.

The impact of fuel shortages is felt throughout the economy. "Bread, for example, is in short supply because some major bakeries depend on fuel for production and distribution," said chief executive officer of the Zimbabwe National Chamber of Commerce, Innocent Makwiramiti.

He insisted that there was an urgent need to open the market to private companies, saying, "The government should move in fast and invite as many procurers of fuel as possible. The advantage is that these companies have the capacity to source foreign currency from different sources and, as we are aware, the government cannot go it alone because it does not have sufficient money to pay suppliers."

Makwiramiti suggested that the government play a monitoring role to ensure the private sector did not overprice fuel, but warned against excessive control, as this would discourage the industry.

Economic analyst John Robertson said while deregulation was welcome, it was not enough to end shortages.

"Deregulation could help improve the situation, but the fact is that it might take us a long while before the situation can normalise. It does not make any sense to liberalise fuel procurement without addressing the problem of how the government can improve the inflow of foreign currency," he noted.

Oil prices on the international market have been rising, making it even more difficult for the government to pay for fuel. A barrel of oil now costs around US $60, up from US $12 in 1999.

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