FUEL TO THE FIRE
There are fears that differences in government circles over economic interests relating to energy supply are affecting political decision-making at the highest level
Abid to overhaul Zimbabwe’s petroleum supply system by installing a second pipeline is stoking tensions between President Emmerson Mnangagwa and vice-president Constantino Chiwenga, if government officials and fuel dealers are to be believed. Mnangagwa owes much to his deputy. It was, after all, the military, under the leadership of then Gen Chiwenga, that deposed long-serving president Robert Mugabe, allowing for Mnangagwa’s elevation to the highest office in the land. And Chiwenga’s inclusion in cabinet — he has retired from the army — is thought to have been a nod to the role the military played in installing Mnangagwa in the presidential office.
But relations between the former allies seem to have soured. Political scientists speaking on condition of anonymity say Mnangagwa views Chiwenga as a threat to his presidency and is trying to dilute his influence. They believe he sidelined allies of Chiwenga politically when he announced his new cabinet in September, giving key posts to loyalists such as Oppah Muchinguri (defence), July Moyo (local government) and Joram Gumbo (energy). His attempts to whittle down Chiwenga’s influence are now playing out on the economic front. Industry insiders and state officials allege that Mnangagwa has interests in the fuel industry through Zuva Petroleum, a fuel importer and major industry player. He is also said to be in favour of a second pipeline to the country, supposedly backed by SA company Mining Oil & Gas Services (Mogs), which would undercut the extensive hold that businessman Kudakwashe Tagwirei has on the country’s energy sector.
Chiwenga is believed to have his own interests in the sector through Tagwirei, a former Mnangagwa ally and CEO of Sakunda Holdings. His company’s subsidiary, Sakunda Energy, is jointly owned by Puma Energy, the SA subsidiary of international oil group Trafigura.
What it means:
Plans for a second pipeline are said to be compounding the tension in government
To understand the tensions, one needs to understand the structure of the Zimbabwean fuel industry. Importers bring fuel into the country through the single existing pipeline before selling it on to wholesalers, which sell it on to retailers.
Because the importers don’t have the foreign currency to pay for imports, the government allocates forex to the companies, though it’s unclear how the individual allocation is determined. The fuel traders build these costs into their price, which is in local currency (bond notes).
The official government position is that the bond notes have parity with the US dollar, but in reality the dollar is worth about three times as much. This means the government is essentially subsidising the fuel companies — the biggest importers are Trafigura, Total, the Independent Petroleum Group (IPG) and Petrotrade — which would seem to be profiting at the government’s expense.
Now a foreign currency shortage has threatened the government’s ability to pay for fuel. Stocks are running low and long queues are forming at filling stations. To avert a crisis, the government has been forced to rely on lines of credit to fund imports, something economists say is further worsening the country’s debt position.
The ministries of finance and energy, which are responsible for the allocations and for all fuel imports, blame the foreign currency crunch for the fuel crisis.
But Farai Kunaka, a representative of petroleum traders under the Motor Industry Association, says that though the fuel shortage is partly a result of foreign currency shortages, it is also due to skewed allocations of forex to pay for fuel imports. Not all traders are receiving allocations, which means they are unable to import fuel to relieve the shortage.