The failure by fuel companies to reduce fuel prices in the face of falling crude oil prices has raised accusations of collusion by government and private fuel companies. It has emerged that some of the fuel companies are owned by powerful politicians or individuals linked to powerful politicians.
Government heavily regulates the energy sector which means that the fixed high prices of fuel are purely of the government’s making which is reluctant to reduce the prices. The government has the power to direct fuel dealers to reduce their prices through a number of statutory instruments.
Petrol has remained $1, 37 per litre while diesel is fixed at $1, 20 a litre depending on one’s location in Zimbabwe. In Mutare petrol is being sold at $1, 26 a litre. This is very high compared to other land locked countries such as Botswana and Zambia where the prices of fuel have gone down to reflect the drop in oil prices.
This is in contrast with other landlocked countries such as Zambia where a litre of petrol costs $1(10kwacha) and $ respectively. Considering that Zambia is a landlocked country also importing its own fuel, the high fuel prices in Zimbabwe are unjustifiable.
In the Democratic Republic of Congo a litre of fuel is being sold for $1, 20. The country imports 100% of its fuel but still sells a litre of petrol at less the price in Zimbabwe.
The price difference of fuel in Victoria Falls and Livingstone, Zambia forces some Zimbabweans just cross the border to fill up in Zambia.
Although government through the Zimbabwe Energy Regulation Authority announced last year that government would force the reduction of fuel prices to protect the public this has not been done to reflect the declining crude oil prices.
This has led to a lot of speculation on what could be happening behind the scenes. Fuel prices have remained high despite the existence of the ethanol project that was heralded as the panacea to high fuels prices several years ago. Many people lost land to make way for sugar cane farming in Chisumbanje as this project would make fuel prices lower.
Some dealers such as Zuva, NOIC and Total have licences to sell blended fuel. Blend fuel was expected to have lower prices after the commissioning of the Chisumbanje Ethanol plant but this is not the case.
A number of fuel companies are believed to enjoy the protection of powerful politicians as the shareholders have political connections in the highest offices.
Investigations have revealed that Zuva Petroleum is owned by Strauss Logistics, a company owned by the Joshi brothers. The Joshi brothers, Jayant Chunilal and Manhalal Chunibal used to run Zanu PF companies when Emmerson Mnangagwa was ZANU PF Secretary of Finance before they fled Zimbabwe in 2004 after they were accused of externalising foreign currency.
They formed Strauss Logistics in the United Kingdom and started bringing fuel in Zimbabwe at the height of fuel shortages in the country under the Direct Fuel Import initiative.
This is not the only fuel company with links to the government or ruling party officials. Sakunda Energy which is believed to have sold its shares to a Dutch consortium was linked with ruling party officials and the Central Intelligence Organisation.
Well known politicians such as Webster Shamu and Saviour Kasukuwere are also known to run service stations or have interests in the energy sector. Some parliamentarians who are supposed to be taking the executive to task concerning the high fuel prices are also well known fuel dealers in the country.
This has heightened fears of collusion between government and private fuel companies in order to maximise revenue and profits for themselves.
The bulk of the money realised from fuel sales is pocketed by the cash strapped government through duties and taxes. Duty for petrol is pegged at 0,632 and diesel at 0,461.The rest is is pocketed by the retailers.
Fixed fuel prices are harming the country’s prospects to resuscitate its industries because industries in neighbouring countries such as South Africa are more competitive due to falling fuel prices and other factors.
Industry would benefit from reduction in fuel prices and this could resuscitate ailing industries to the benefit of the whole economy but government is prioritising maximising revenue at the moment.
Such short sighted is as a result of conflict of interest where a few individuals in the ruling party are financially benefiting from the situation. Government is also under pressure to honor its obligations and it is resorting to taxing sectors such as the energy sector to stay afloat.
There are other factors that are contributing to high fuel prices in the country. Zimbabwe’s Feruka Pipeline which used to bring in crude oil from Mozambique is not working. This means the country is importing processed fuel already. The rail way is in a poor state meaning fuel importers have to rely on road transport which is more expensive.
An executive with one of the fuel companies said “There could be other factors such as shortage of refineries that can result in fuel prices remaining high. Zimbabwe has a shortage of refineries and has since closed the Feruka pipeline which carried the bulk of the country’s crude oil from Mozambique”
Zimbabweans must not expect the government which is benefiting through the high fuel prices to take any action. Ultimately the fixed fuel prices expose a hypocritical but short sighted government that is undermining its own plans to resuscitate industries and create jobs in order to satisfy the greed of a few individuals.