Fire erupts over fuel deal

TINASHE MAKICHI

Fuel retailers in Zimbabwe are up in arms with the country’s biggest ethanol producer Green Fuel over its ethanol pricing structure which they say has made local fuel expensive.

An investigation by Business Times this week revealed that fuel companies are buying a litre of ethanol at US$1.10 inclusive of transportation from Green Fuel’s Chisumbanje plant to Harare either to their private depots or to the National Oil Infrastructure Company depots.

This means that the price of ethanol alone is higher than the price of unleaded petrol. Fuel is being sold at ZWL$82.05 per litre for diesel 50 and ZWL$97.11 for petrol.

In US$, fuel is being sold at US$1 and US$1.19 per litre for diesel and petrol respectively.

The government recently increased the mandatory blending of unleaded petrol to 20% from 10%.

Players in the fuel sector said the continued use of local ethanol has made fuel expensive adding it was now cheaper to import ethanol from Brazil than buying it locally.

They also claim that Green Fuel was reluctant to accept payment in local currency compounding the situation.

Business Times can report that local fuel companies have since engaged the country’s energy sector regulator, the Zimbabwe Energy Regulatory Authority (ZERA), over the matter.

They said there was a need to revert to unleaded petrol because blending was no longer serving its purpose.

“The fuel players are of the concern that blended fuel is now actually expensive compared to unleaded petrol of which the whole idea around blending was to avoid the cost of importing unleaded petrol,” the chairman of the Indigenous Petroleum Association of Zimbabwe, Aaron Chinhara, told Business Times this week.

“The situation has been worsened by concerns that the ethanol producer is rejecting local nostro payments.” Chinhara owns Glow Petroleum.

Contacted for comment, Energy and Power Development Minister Zhemu Soda referred this publication to ZERA but indicated that the existing fuel blending policy was going to stay.

 “You will have to communicate with ZERA on the breakdown of the fuel cost structure but the blending policy is going to stay taking into consideration the investment perspective at hand.

“Remember this is an investor that has invested funds into the project and also secured loans that still need to be serviced and for you to then wake up one day and change the policy-that can be disastrous to the investor,” Soda said.

An enquiry was sent to ZERA chief executive Eddington Mazambani on Tuesday this week. Mazambani promised to respond later but he had not done so by the time of going to print last night.

Green Fuel legal advisor Derek Elliot told Business Times that it was not factual that the company was rejecting local nostro payments.

Elliot said fuel companies must “send letters with the full value of the amount through their bankers to our bankers and it is that simple.”

Zimbabwe introduced mandatory petrol blending in 2011 following the fuel crisis that rocked the country.

The government wanted to preserve foreign currency associated with fuel importation.

Green Fuel, which is a joint venture between the government’s Agricultural Rural Development Authority and business tycoon Billy Rautenbach, has been the sole supplier of ethanol for many years, until the recent entrance of Hippo Valley as another ethanol supplier.

Green Fuel and Hippo Valley are, however, struggling to supply adequate ethanol to the market.

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