Energy

ZERA elbows out small petroleum players

TINASHE MAKICHI

Zimbabwe’s energy regulator has announced stringent regulations for the petroleum sector that could elbow out new entrants amid concerns that this could result in the emergence of an oligopoly, Business Times has learnt.

The southern African country has been experiencing erratic fuel supplies due to sagging exports and rising demand for the commodity on the back of erratic fuel supplies.

Information gathered by this paper shows that the Zimbabwe Energy Regulatory Authority (ZERA), which regulates the billion-dollar petroleum industry decreed that fuel players should have at least 25 service stations to renew their licences in a move which will create barriers of entry and results in a market dominated by a small number of players.

The regulations, which have rattled small players, is alleged to have been influenced by a section of big players in the industry, according to players in the sector.

In a notice to the petroleum sector recently, ZERA said fuel players should at least own 25 service stations as well as providing evidence of such ownership.

It said a procurement licensee should provide a performance bond with a value of ZWL$30m before licensing, a situation which has generated a massive outcry among small and new players in the sector.

Indigenous Petroleum Association of Zimbabwe (IPAZ) chairman Aaron Chinhara said players were in a lurch and will meet today on the way forward. “We are going to meet today as an industry (specifically indigenous players). The agenda of the meeting are issues around new regulations introduced by ZERA,” Chinhara said.

Zimbabwe’s fuel industry is dominated by three main players – Sakunda, Zuva Petroleum and Puma. Puma is majority-owned by Trafigura and the Angolan Sonangol Group.

The other cluster is however controlled by indigenous players who have been responsible for importing daily fuel of about 4.1m litres of diesel and 3.1m litres of petrol.

Official figures show that the fuel companies require about US$30m a week to meet the market’s fuel requirements. A well-placed fuel sector source who requested anonymity said the regulations were formulated to protect the interests of a few companies. “It is quite shocking that ZERA came up with such a regulation.

This regulation is creating a cartel of fuel players because how many fuel players possess 25 service stations?

“This means new entries into the market have been restricted while those already in the market with fewer sites may not be able to renew their licences,” the source said.

Small and new fuel companies are of the opinion that the regulation was formulated to put barriers on new entries in the market at the same time hounding out small players already in existence.

ZERA acting chief executive Eddington Mazambani did not respond to questions sent to him at the time of going to print.

The current regulations have put a majority of indigenous and small petroleum players on a tight spot, as most of them may end up failing to renew licences while new entrances have also been severely restricted.

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, government pushed for the merger of local fuel companies with the multinationals to work under PMZ to create a more stable fuel industry.

Zimbabwe’s fuel sector is currently subject to scrutiny after President Emmerson Mnangagwa’s Special Anti-Corruption Unit (SACU) started investigations on rampant fuel smuggling done by private fuel companies necessitated by their continued resistance to adopt the recently formulated fuel monitoring and management system.

To foster accountability, SACU has since written to the Office of the President and Cabinet, Zimbabwe Republic Police and the President’s Department among other relevant government departments.

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