The wrangle over fuel pricing intensified this week with revelations that oil companies are selling the commodity at inflated prices after receiving foreign currency from local banks.
Reserve Bank governor Gideon Gono has called it fraud and threatened to intervene. The government is understood to be drawing up plans for price controls.
Experts, however, warned that a return to price controls would likely cripple the formal sector and feed into the black market where petrol sells for as high as Z$680 a litre.
Dealers have been resisting selling fuel at the gazetted prices of Z$320 (diesel) and Z$335 (petrol) agreed with government two weeks ago, arguing that they are not getting cheap foreign currency from the Reserve Bank at the official exchange rate of Z$250 to the US dollar. They argued that the gazetted prices were not viable because they were compelled to source foreign currency from the parallel market where the United States dollar fetches between Z$600 and Z$700.
They have continued to sell their fuel at prices of between Z$620 and Z$680 despite the agreement with government to sell at Z$320 and Z$335.
It emerged this week that a number of companies are getting foreign currency at the official rate but still sell fuel at the parallel market rate. Banks that are holding foreign currency on behalf of exporters have been allocating part of the funds to fuel importers at the official rate of Z$250 to the greenback.
Sources said some filling stations were also getting fuel from Noczim (National Oil Company of Zimbabwe) for on-sale at agreed dealer prices of Z$244 for diesel and Z$257 for petrol. This was, however, diverted to the black market where margins are much higher, prompting government to warn of a return to controls.
A cost built-up mechanism for fuel agreed between government and oil marketers shows that the new prices allow for a profit margin that will enable companies to break even.
Calculations used show that if imported at the current official exchange rate, the landing price for fuel is Z$181,50 and Z$179 per litre for diesel and petrol respectively. If they get fuel from Noczim, the handover price is Z$244 (diesel) and Z$257 (petrol). The total cost is between Z$267 and Z$280 per litre.
According to the calculations, a dealer will have a profit margin of 10,4% per litre. The calculations take into account financing costs, duties, carbon tax, pipeline costs and a road levy of 5%.
The gazetted prices also take into account costs of handling the product, storage and secondary transport costs. Gono confirmed to the Zimbabwe Independent that the central bank could be forced to intervene because dealers were acting in bad faith.
“There is clear fraud, we might be forced to intervene. That cannot be tolerated,” Gono said. “We know some companies that are getting money from banks at the official market rate but still sell it at inflated prices. We are now considering monitoring the foreign-currency allocations. They must account for every cent they get.”
Sources said the government was already working on a plan to monitor and control fuel prices. They said the Ministry of Energy and Power Development had started working on a document to be presented to Cabinet in which it proposes stern measure against fuel dealers engaged in unscrupulous transactions at the expense of consumers.
“They are now working with the National Economic Development Priority Programme’s task force on energy to reintroduce price controls,” said a source who attended one of the meetings where the idea was mooted.
The task force is made up of officials from the president’s office, army, ministry officials and the police.
“One of the recommendations is that we withdraw the licences if they continue like that,’ the source said. The task force will brief the Cabinet on the proposals in the next two weeks, which is expected to make a decision thereafter.
“That decision won’t be difficult to push because the government is already infuriated by reports that some farmers have failed to deliver grain because of the high fuel costs,” he said. “The thinking in the government is that they are sabotaging the economy.”
Zimbabwe has been experiencing fuel shortages since the economic crisis started after the government sanctioned land invasions, which have destroyed the commercial agricultural sector — the main source of foreign currency. — Zimbabwe Independent and Standard