dyton mupawaenda
Elliot Ziwira-Senior Writer
The decision to liberalise the fuel subsector, among other effective policy frameworks, has ensured adequate fuel supply and stability for Zimbabwe.
In the past, the country faced a seemingly unrelenting fuel crunch as the sub-sector was weighed down by inadequate foreign currency in its efforts to import enough quantities to meet rising demand.
Notwithstanding the devastating economic sanctions imposed on the Southern African country by the West, the vehicular population kept surging buoyed by a resiliently growing economy, hence maintaining strong demand for fuel.
Now, queuing for fuel hours on end has become a thing of the past, as the Second Republic, under the stewardship of President Mnangagwa, introduced a combination of measures to deliver on the mandate to power the nation to collective prosperity.
Historical background
It has to be recalled that in colonial Rhodesia only four companies had the opportunity to participate in the oil industry. Through ownership of fuel storage reservoirs throughout the country, multinational companies enjoyed monopoly over the sector.
The four companies operated the Government-owned Beitbridge Fuel Storage Point, importing fuel through the southern border from National Petroleum Refineries of South Africa Limited (NATREF).
Fuel supply was the preserve for these major oil traders with the Government having little influence over them. The Government-owned Feruka Storage Point, however, received its fuel supply by road and rail through Beitbridge as the Mozambique route was inactive due to the security situation then.
In the 1960s, a pipeline was constructed for the purpose of transporting crude oil from Mozambique into Rhodesia. The Rhodesian government granted Central African Petroleum Refineries (Private) Limited (CAPREF), jointly owned by Total, BP and Shell, permission to construct a refinery at Feruka for the purification of oil products. The refinery only operated for a year, from 1965 to 1966.
Since Independence in 1980, milestones have been achieved in the petroleum sector.
The Government and Companhia do Pipeline Mocambique-Zimbabwe Limitada (CPMZ) signed an agreement in 1982, which resulted in the CPMZ converting the Beira-Feruka pipeline from conveying crude oil to refined fuel.
Today, the Beira-Feruka pipeline is the primary mode of fuel transportation into the country, accounting for 95 percent of imports, with road and rail accounting for the remainder. Having been converted, the pipeline has been ferrying refined oil products since 1983.
The Government established the National Oil Company of Zimbabwe (NOCZIM) in 1983 as the sole importer of fuel into the country.
In 1994, a joint venture company, PetroZim Line (Private) Limited was formed by NOCZIM and LONMIN (then LONRHO), to construct and operate a petroleum products pipeline from Feruka (Mutare) to Msasa (Harare) ,and storage facilities at Msasa Depot, which enabled the country to load fuel out of Msasa. Fuel supply no longer terminates at Feruka as was the case in the past.
In 2019, the National Oil Infrastructure Company of Zimbabwe (NOIC) acquired all LONMIN shares in the pipeline, thus becoming the sole shareholder, giving the Government total control over this strategic asset.
Situational analysis in the petroleum sector
As alluded to earlier, most of the petroleum products consumed in the country are imported, with the bulk of the fuel being transported through pipeline. According to the Zimbabwe Energy Regulatory Authority (ZERA), Zimbabwe consumed an average of four million litres daily in 2020 with petrol figures standing at 1,5 million litres and diesel at 2,5 million litres.
Latest figures indicate that the country, on average, requires three million litres of petrol and four million litres of diesel per day.
About 95 percent of the fuel is transported via the Beira pipeline route, while five percent is transported mainly by road, and rail from South Africa.
For over two decades the economy of Zimbabwe has been reeling from economic sanctions, which at some point hampered fuel supply. In spite of the sanctions, the economy has remained irrepressible, recording firm growth, even.
During that period, principally in the last decade, the vehicle population continued to grow, as did most sectors of the economy, thus sustaining strong demand for fuel.
The delivery
Despite all the setbacks culminating from the economic sanctions imposed on the country, the Second Republic delivered on its promise to the people of Zimbabwe through enabling policy structures in the petroleum sector.
The Government, as always, came up with a panacea to chronic fuel shortages.
As an import substitution mechanism, Zimbabwe adopted ethanol blending to cut on the fuel import bill, and also reduce carbon emissions. Blending is up to 20 percent depending on availability of ethanol. The bulk of the ethanol comes from Chisumbanje and Triangle Sugar Estates.
The Government introduced the Direct Fuel Import arrangement in 2019 to allow companies with free funds to procure their own fuel and trade in foreign currency. Under this scheme, which has become the major source for the country, the fuel supply situation has stabilised.
Also, the decision to liberalise the fuel subsector saw the country witnessing a tremendous growth in the number of retail markets, with a number of filling stations being constructed. This improved convenience to motorists, and increased competitiveness in price and services by the various players.
Another intervention in the petroleum sector by the Government is the US$7,3 million NOIC Mabvuku ethanol storage facility in Harare, which was commissioned by the President on November 7, 2023.
This project involved the construction of 2×3 000m3 ethanol storage facilities. It was undertaken by NOIC without any credit or other external financial assistance. According to NOIC, the establishment of the facility, which will boost ethanol handling capacity by 100 percent, will see Zimbabwe saving an estimated US$60 million per year in foreign currency.
The national storage capacity now stands at 11,2 million litres, up from 5,2 million litres. The facility will also open up employment and wealth generation opportunities for Zimbabweans in the biofuel value chain, thus testifying to the Second Republic’s inward-looking thrust in seeking home-grown solutions that take everyone on board.
Its main objective is to ensure maintenance of consistent blending ratio through the provision of adequate ethanol in the country in all seasons. It will also reduce the import bill of petroleum products through import substitution.
Furthermore, the Government, through NOIC’s subsidiary, PetroZim Line (Pvt) Ltd (PZL), in partnership with Companhia do Pipeline Mocambique-Zimbabwe Limitada (CPMZ), has also embarked on a capacity upgrade of the Feruka Pipeline.
Currently, the pipeline has a capacity of 2,19 billion litres per annum. The project is being implemented in phases, with the first phase targeting to achieve a capacity of three billion litres per annum, and subsequently five billion litres per year in 2025.
Through this venture, Zimbabwe will have excess pumping capacity to be the hub of fuel transportation and distribution in the Southern African region.
Speaking at the commissioning ceremony, President Mnangagwa applauded the partnerships by both local and international players, which have resulted in the construction of the strategic national handling facility.
“On its part, my Government will continue to foster an enabling environment that ensures that the biofuel sector is able to sustainably supply feedstock for the blending of petrol with ethanol. As the production of ethanol increases, the establishment of additional storage facilities in different parts of the country will also be considered,” he said.
The President emphasised that infrastructural development projects, as enshrined in National Development Strategy 1, are crucial in Zimbabwe’s pursuit to be an “effective and efficient land-linked regional hub for fuel distribution in Southern Africa.”
In 2020, the Government tightened surveillance mechanisms to ensure fuel procured using free funds under the Direct Fuel Import (DFI) facility was not prone to abuse by dealers in the subsector.
Dr Michael Pasara, an economist, extolled the Government for liberalising the fuel sector, saying it led to the accrual of direct and indirect benefits to Zimbabweans.
“Having more players in the industry led to consistency and stability in terms of supply, which in turn translates into unending multiplier effects due to increased economic activity. Simply put, it spurs economic growth prospects,” Dr Pasara said.
He highlighted that multiple suppliers entailed a transition from a monopolistic kind of market structure and limited proclivity for collusive behaviour, resulting in competitive pricing and supply sustainability.
“Liberation also occasioned infrastructural developments as more filling stations are being constructed across the country, hence more economic gains are accumulated through value chains in the increased activities around new economic centres,” said Dr Pasara.
He underscored that a filling station is usually accompanied by other service or retail outlets, such as fast-food shops, car washes and/or supermarkets; aggregating the employment creation effects and term developmental impacts.
Furthermore, he pointed out that liberalisation eased pressure on the central bank as it provided channels “through which idle foreign currency balances in the private sector could be employed towards the productive sector of the economy”, although it still plays “a critical regulatory role.”
Dr Pasara said opening up of spaces in the fuel subsector broadened the tax base for revenue collection too, although loopholes needed to be plugged through effective monitoring and use of smart technologies by oversight institutions like ZERA and the Zimbabwe Revenue Authority.
“More players mean increased complexity of regulation and monitoring of the sector, thereby creating avenues for opportunistic behaviour,” he said.
“Thus, it is imperative that regulatory authorities adopt efficient monitoring frameworks, such as increased utilisation of smart technologies. For instance, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube announced in his 2024 National Budget outline that fuel tax increased by a margin of around two to three cents. Therefore, it requires strict monitoring to curtail revenue loopholes.”
Ms Chenai Mutumha, a Harare motorist, said the nightmarish fuel shortages in the past ate into productive time, underscoring that the liberalisation of the sector was a masterstroke as it turned around the situation.
“Fuel shortages were a headache. It was normal for motorists to spend hours, or even days in fuel queues, which was impeding productivity. Thanks to the Government, queuing for fuel is now confined to the past. Driving is now a pleasure,” Ms Mutumha said.
Another motorist, Mr Munyaradzi Ndoro, of Chitungwiza, commended the Government for resolving the fuel crisis, saying the Mabvuku ethanol facility would guarantee that queuing at filling stations remain a thing of the past.
“Driving used to evoke dreadful moments, particularly when one had to consider spending nights queuing for fuel, without any assurance that one would eventually get it. With the Government effectively playing its part, my only worry now is hitting the pedal, and filling up my tank,” said Mr Ndoro.
He said although fuel prices in the country were on the high side in comparison with other countries in the region, consistent blending with ethanol would keep them in check.
“In my view, availability outweighs pricing. A situation where queuing for fuel becomes the norm is a bygone era.
“Blending will not only save the country foreign currency, but will also keep prices down, since ethanol is produced locally. Therefore, the ethanol storage facility recently commissioned by President Mnangagwa in Mabvuku is a game-changer in the fuel subsector,” Mr Ndoro said.
Mr Barnabas Chadamoyo from Harare said he appreciated the Government’s efforts to make fuel readily available.
“There was a time we used to spend days without fuel, or queuing for it, which negatively impacted my family’s livelihood since I am self-employed. With fuel available everywhere, I can now work on a daily basis, which has transformed my life. I would like to thank President Mnangagwa for solving the fuel matter, which had caused headaches for motorists in the past,” he said.
Echoing similar sentiments, Mr Lovemore Mutsena, who is into transport and logistics, and is based in Harare, said fuel is a fundamental component of his business, thus, its constant supply does not only drive his fleet, but grows the economy as well.
“Without transport, the nation cannot move forward. Transportation is key to the growth of the economy and overall nation building, because it is linked to every subsector. Therefore, I would like to take this opportunity to thank the President for ensuring the availability of fuel and opening up spaces for locals in the subsector,” Mr Mutsena said.
Online Reporter