The politics of petrol in Zimbabwe

There are fears that differences in government circles over economic interests relating to energy supply are affecting political decision-making at the highest level

Constantino Chiwenga

Emmerson Mnangagwa

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.

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.

“We [the smaller traders] were not getting the allocations [of forex] in the first place,” says Kunaka. “Total, Zuva, Sakunda and Puma had preference. Few allocations were coming in, but we had questions about the way the allocations were being made.”

Zimbabwe’s treasury has not been forthcoming about the forex allocations. Instead, permanent secretary for the finance ministry George Guvamatanga has pointed to government intervention as essential to keeping fuel affordable. “If they [fuel traders] are allowed to source lines of credit, they have to source them offshore and will have to pay back in foreign currency, which means they have to sell in forex,” says Guvamatanga. “What kind of fare will public transporters then charge?”

But some industry players suspect the murky allocation of forex is used to benefit the bigger players — like Tagwirei’s businesses. They say Sakunda and Puma Energy, in particular, have received forex allocations ahead of other dealers.

Now Tagwirei’s fortunes seem to be shifting.

A ministry of energy official, who did not want to be named, says Tagwirei, through Puma, Sakunda and the smaller petroleum companies in which he has interests, received favourable treasury allocations of forex for the past two years. But most allocations now go to IPG, which includes companies such as Trek Petroleum and Engen Zimbabwe, among others.

This shift has apparently unnerved Chiwenga, who fears Tagwirei is being muscled out of the fuel industry.

“That is the major issue that sparked the tensions, because Tagwirei is being pushed out. When you look at it, there has also been talk of a second pipeline, but we all know who refurbished [the current pipeline],” says the official, referring to Tagwirei.

Economist John Robertson similarly believes traders with links to government officials benefit through favouritism in the forex import allocations, which disadvantages other traders in the industry — though he maintains that forex access is the primary constraint on the fuel supply at present.

“There are some government officials who are benefiting from existing arrangements and want to continue benefiting, and others who want a new arrangement that gives them a chance to benefit. There appears to be a serious conflict for the control of the fuel industry in the ranks of the ruling party,” Robertson says.

Bekezela Gumbo, the principal researcher at the Zimbabwe Democracy Institute, tells the FM that differences between Mnangagwa and Chiwenga over economic interests may threaten the long-term investment prospects for the country.

“It is [said] that Tagwirei is a shadow [for] Chiwenga, essentially being used to secure Chiwenga’s interests — that’s the perception,” says Gumbo. “It means Chiwenga and [Mnangagwa] are clashing economically through these fights to remove control of Tagwirei in the fuel industry.”

Mnangagwa aims to undermine Chiwenga’s influence by breaking the dominance of Tagwirei in the fuel industry, according to insiders.

Compounding the tension is the bid for the second pipeline. Tagwirei is understood to have helped refurbish the country’s pipeline from Mozambique to Harare at a time when Mnangagwa has been mulling the installation of a second pipeline and a new dry port for petroleum in Harare.

Government and fuel industry sources say Mogs’s bid to invest in the pipeline has received support from Mnangagwa as well as from Chris Mutsvangwa, a former adviser to Mnangagwa.

Royal Bafokeng Holdings, which controls Mogs, did not respond to e-mailed requests for comment, despite its spokesperson acknowledging receipt of such request.

If the bid for a second pipeline succeeds, it may provide more options for downstream sellers, but it is likely to intensify competition at the upper end of the fuel chain, where players like Tagwirei have dominated – and where the stakes are much more lucrative.

“This effectively means that Zimbabwe’s problems, including the fuel challenges, are a political problem. The problem is at the political apex and it’s affecting decision-making,” says Gumbo. “The leadership is not seeing [eye to eye] … In the long term it will destabilise the country.”

Zimbabwe presidential spokesperson George Charamba had not responded to the FM’s e-mailed questions by the time of writing.

Earlier, he had been noncommittal about answering questions concerning the alleged tensions between Mnangagwa and Chiwenga.

He also implied by phone that the president was not happy about the fuel supply situation in Zimbabwe. Pressed to confirm whether Mnangagwa has personal interests in the petroleum industry, he accused the FM of trying to “legitimise” a conception.

Tagwirei could not be reached for comment, while Mutsvangwa was said to be away.

Post published in: Business

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