TINASHE MAKICHI
The government has come to the rescue of indigenous fuel companies by issuing Letters of Credit (LCs) to them as it seeks to improve the fuel supply situation, early enough for the Christmas season.
This comes after the Zimbabwe Energy Regulatory Authority (ZERA) has advised indigenous fuel companies grouped under the Indigenous Petroleum Association of Zimbabwe (IPAZ) to come up with a consortium to boost their capacity to raise LCs. An LC is a letter from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount.
The failure to raise LCs by indigenous players is one of the challenges that has resulted in the worsening fuel situation in the country.
There are six major oil-importing entities, including IPAZ, Zuva Petroleum, Puma Energy, Total Zimbabwe, Petrotrade and Engen Petroleum Zimbabwe. IPAZ is the largest importer of fuel, providing 11.7 million litres of diesel and 8 million litres of petrol annually.
While giving an update on Cabinet deliberations on Tuesday, Information Minister Monica Mutsvangwa said the Minister of Energy Fortune Chasi had briefed the Cabinet on the fuel situation, and had emphasised that it would be normalised as indigenous fuel companies would be issued with LCs.
“Cabinet assures the nation that the necessary steps are being taken to ensure that the fuel situation is normalised during the festive season and beyond,” Mutsvangwa said. “Indigenous oil companies will be issued with Letters of Credit to enable them to complement the efforts of the government in satisfying the market.”
Business Times is informed that indigenous players have since written to the central bank notifying them of their intention to set up a consortium big enough to raise letters of credit for fuel procurement.
Eddington Mazambani, ZERA’s acting chief executive, confirmed receiving information regarding the communication to the central bank.
“The indigenous players did the communication through their association,” Mazambani said. “They have since indicated to me through their chairman that they have written to the RBZ notifying them of their intention to raise LCs as a consortium or association. So it’s true they have since done the communication.”
IPAZ was formed in 2004 after a nasty fallout between local and international fuel players to counter the dominance of the Petroleum Marketers of Zimbabwe then controlled by multinationals – BP, Shell, Mobil, Caltex, Total, as well as Engen and three indigenous companies.
A year later, the government pushed for the merger of local fuel companies with the multinationals to work under PMZ to create a more stable fuel industry.
Sakunda and Redan used to be members of IPAZ until their takeover by the Singapore-headquartered Trafigura group and Puma. Puma is majority-owned by Trafigura and the Angolan Sonangol Group.
