Fuel com­pa­nies call for 2-week forex cover

The Herald (Zimbabwe) - - Business - Tawanda Musarurwa Busi­ness Re­porter

FUEL firms op­er­at­ing in the coun­try have said Gov­ern­ment should sup­ply them with two-week worth of for­eign cur­rency cover to en­sure there are no gaps that “ex­ag­ger­ate” the fuel short­ages.

Ap­pear­ing be­fore the Par­lia­men­tary Port­fo­lio Com­mit­tee on Mines and En­ergy, Ma­jor Oil Com­pa­nies In­dus­try Fo­rum rep­re­sen­ta­tive and act­ing CEO for Petro­trade God­frey Ncube, said it is dif­fi­cult to erad­i­cate the long queues be­cause of the gaps in sup­ply. The Ma­jor Oil Com­pa­nies In­dus­try Fo­rum is con­sti­tuted by com­pa­nies in­clud­ing To­tal Zim­babwe, En­gen, Petro­trade, Zuva Pe­tro­leum and Puma.

“As oil com­pa­nies, we have a dis­tri­bu­tion struc­ture de­signed to top up stocks in the ser­vice sta­tions on our com­mer­cial cus­tomers. Some­times when the ser­vice sta­tions run dry, it takes longer to com­pletely erad­i­cate the queues be­cause each drop is wiped out within a few min­utes,” said Mr Ncube.

“We then would re­quire a bit of time. Each one of us cur­rently gets fuel at dif­fer­ent times and we try and fill the gap. We sug­gest the Gov­ern­ment to try and just have a two-week pe­riod to al­lo­cate most of the for­eign cur­rency to the fuel com­pa­nies so that we make all ser­vice sta­tions wet and then work on top-up ba­sis.”

Zim­babwe has been fac­ing fuel chal­lenges over the past two weeks as the for­eign cur­rency sit­u­a­tion con­tin­ues to bite.

Added Ncube: “The con­sump­tion of pe­tro­leum prod­ucts has in­creased this year, and the Zim­babwe en­ergy Reg­u­la­tory Au­thor­ity would be able to give us the num­bers if re­quired.

“This cou­pled with the prices of fuel that had been go­ing up un­til the last one month did put a huge pres­sure on for­eign cur­rency re­quire­ments.

“This has cre­ated a sig­nif­i­cant gap in a coun­try that has been im­port­ing most of its prod­ucts with pres­sure, from wheat, med­i­cals and other key re­quire­ments.”

Mean­while, the Ma­jor Oil Com­pa­nies In­dus­try Fo­rum have said that they want Let­ters of Credit (LCs) be­ing al­lo­cated by the cen­tral bank for fuel pay­ments to cover le­gacy debts owed to sev­eral fuel traders that bring fuel into the coun­try.

In view of the pre­vail­ing for­eign cur­rency short­ages, most fuel com­pa­nies in the coun­try have adopted in­no­va­tive ways to cir­cum­vent the prob­lem, namely the use of LCs.

With a let­ter of credit a buyer’s bank can guar­an­tee pay­ment to a seller if cer­tain cri­te­ria are met. LCs help re­duce the pay­ment risks on in­ter­na­tional trade trans­ac­tions.

“The Re­serve Bank of Zim­babwe has pro­gres­sively sub­sti­tuted cash al­lo­ca­tions by Let­ters of Credit to help us pay for the fuel.

“We can­not deny that set­ting up these LCs is a chal­lenge, which cre­ates is­sues when they need to be rolled over. Our sup­pli­ers have also done well by ex­tend­ing credit and keep­ing stocks in the coun­try.

“We see an op­por­tu­nity of im­prove­ment if we al­low LCs to be al­lo­cated to old in­voices from our sup­pli­ers so that their debt moves to avoid bad debt un­like the cur­rent sit­u­a­tion whereby an LC is for fu­ture pur­chases,” said Ncube.

“We can dis­cuss with our sup­pli­ers to al­low us to draw out prod­uct equiv­a­lent to the amount of the LC but pay up old in­voices with the long­est over­due pe­riod.”

They ex­pect that once the debt gap is cov­ered it will be­come eas­ier for the fuel traders to ex­tend fuel to in ad­vance of pay­ments.

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