admin
Robert Zhuwao Correspondent
The process on indigenisation should be bound by supervision and training by the authorities to ensure longevity of the benefiting businesses.
In the latest edition of The Sunday Mail newspaper is a story titled “Big fuel firms wings to be clipped”.
According to the story, the Zimbabwe Energy Regulatory Authority (Zera) chief executive officer, Engineer Gloria Magombo, explained that a law was in the process of being proposed that would protect local fledgling companies against machinations being employed by multinational companies.
In short, local fuel companies are being muscled out of business by multinational companies who were rigging prices in their favour.
Reading the story I felt a sense of déjà vu.
It reminded me of a piece I penned on how the fuel industry has transgressed in terms of indigenisation.
My contribution, which appeared in The Herald edition of January 1, 2016 titled “Fuel industry: The great betrayal of indigenisation” aptly covered the progress and gains that had been achieved in indigenisation of that sector.
In that piece I recalled how the Indigenous Petroleum Group of Zimbabwe was born out of the need to liberate the fuel sector which was in the clutches of large foreign companies and their local stooges.
The IPGZ grew from strength to strength with membership quickly rising to 180 in three months out of an industry with 200 companies.
IPGZ set out to fully indigenise the fuel sector and was lucky to have had the backing of Government with then Minister July Moyo helping indigenous companies secure foreign currency.
My IPGZ board that ushered in the indigenisation of the sector operated before the setting up of Zera; rather than craft new laws to protect the local industry players at a cost to the multinational companies, Zera and the Ministry for Energy and Power Development need to look and ascertain how the industry ended up being in multinationals hands again.
It is pointless trying to crisis manage an industry that we all know indigenised in 2005. I chaired the Indigenous Petroleum Group of Zimbabwe which ushered in the indigenisation of the fuel industry.
For some time until recent years, local companies – indigenous players – did well.
Now they are being swallowed by multinational companies again.
What has happened since then, who were the players involved in handing back the sector to multinationals and why was that allowed to happen?
Fuel is a volume-based game. When we set up the industry from 2004-2006, fuel for the industry was procured using one special purpose vehicle (SPV) to enable for economies of scale. An organisation importing 5 million litres of product would enjoy better pricing than one importing 100 000 litres. Such a structure also protected against externalisation of the USD and money laundering.
How and why were such structures dropped? How would it benefit the country and secure the country against fuel shortages in the future? All these are questions which those who were in the industry back then ask in relation to the status quo.
Moreover, the current scenario is one which our very own Noczim could have taken advantage of as they could have imported the product and sold it at lower prices like what the current multinational companies are doing. I do not think at this stage that creating laws to protect the local players may have the desired results as they have been outnumbered in a big way already and their competitors now enjoy economies of scale to sustain viability.
In my opinion, it may be prudent to retrace where the loophole was that allowed the current multinational companies to take over the market and those that facilitated their entry brought to book. From my understanding of the industry, corruption could have had a hand in their entry. Whether one is still employed in Government or not, those that signed off indigenisation retrogressively need to be brought to account.
As it is, we have placed the country in a precarious and perilous position as if the laws to be enacted affect the multinationals’ balance sheet; they may opt to withhold importation of fuel in the business if such importation is not going to be viable for them. They are not bound by loyalty to their country like local fuel companies, they are loyal to their shareholders who want to see a return on their investment.
The process on indigenisation should be bound by supervision and training by the authorities to ensure longevity of the benefiting businesses. Indigenous beneficiaries may not have the expertise that comes with the corporate politics of the affected businesses. Further, there might be a need to enact tough laws for individuals who act retrogressively in an indigenised industry. The country cannot afford to be going backwards and using Government labour, time/resources to settle matters that would have been settled long before.
Robert Zhuwao is the Acting National President of the National Business Council of Zimbabwe (NBCZ), a registered NGO lobby group, think-tank, demand based training, capacity building institute for indigenous business development.Email. [email protected]
Online Reporter