Duty-free fuel scam deepens

Source: Duty-free fuel scam deepens – The Zimbabwe Independent August 11, 2017

A FUEL scandal has rocked government after it emerged that two private companies imported 312 million litres of diesel duty-free, while prejudicing the broke Treasury of revenue in unpaid taxes, an investigation by the Zimbabwe Independent has shown.

Bernard Mpofu/Owen Gagare

The diesel, some of which has found its way to the black market, has a pump market value of US$374,4 million, calculated at US$1,20 per litre.

Diesel is charged taxes and levies amounting to 0,50 cents per litre and these include duty, Zimbabwe National Road Administration road levy, carbon tax, debt redemption, strategic reserve levy and the NocZim debt levy.

The NocZim debt levy was introduced in 2003 to clear the now disbanded parastatal’s accumulated debt to mostly foreign fuel suppliers and is charged at 6,7 cents for petrol and 1,3 cents for diesel per litre. This means that government could have been prejudiced US$156 million in unpaid levies and taxes.

Last year, government granted national project status to the Dema Emergency Power Plant as the country grappled with a perennial energy crisis that resulted in intermittent power cuts. Another company, African Chrome Fields, was also illegally exempted from paying taxes for its mining project, openly violating the law.

The two companies, it has been established, were granted the green light to import the duty-free fuel by the Ministry of Transport and the Central Mechanical Equipment Depot (CMED).

Information gathered by the Independent shows that African Chrome Fields applied for 12 million litres of diesel for the period April to December 2016, while Sakunda Holdings, which is behind the Dema project, applied for 300 million litres of diesel for a period of 12 months.

This violates Statutory Instrument (SI) 184 of 2014, which describes duty-free fuel as “fuel for the exclusive use of the Government of Zimbabwe, subject to the conditions that:

(a) all fuel importations for use by the Government of Zimbabwe shall be imported solely through the CMED (Private) Limited and;

(b) a duty free certificate under the hand of the Secretary in the Ministry responsible for Transport is furnished to the Commissioner-General certifying that the user Ministry or arm of Government has authority from the Secretary in the Ministry responsible for Finance that any duty leviable on such fuel importation would be borne directly by the Government of Zimbabwe”.

The law specifically states that only government can access duty-free fuel. As reported by the Independent last week, it is also understood that a Parliamentary Committee on Mines and Energy is sharply divided over this matter, with some members of the committee demanding that the Sakunda boss, Kuda Tagwirei, be summoned to answer questions in parliament, while others are opposing the move. Transport minister Jorum Gumbo, according to sources, has stated that the exemption of taxes on the imported fuel by Sakunda and African Chrome is above board. He cited Statutory Instrument 6 of 2016, which states that once a project has been elevated to national status by the Finance ministry, it qualifies for “rebate of duty on capital equipment imported for use in specified industries”.

However, the same piece of legislation defines that capital equipment only includes “plant, equipment and machinery” to be used in the mining, manufacturing, agricultural and energy generation sectors.

Concerns have also been raised over the absence of monitoring mechanisms to ensure that the imported fuel does not end up on the black market. Official figures show that Zimbabwe has the capacity to consume three million litres of diesel and two million litres of petrol per day. Currently, on the local market diesel and petrol are pegged around US$1,20 and US$1,33 respectively. Government acquires its fuel requirement through the CMED in line with Statutory Instrument 184 of 2014.

It is also understood that the Ministry of Transport had told parliament that an “anomaly” which saw the inclusion of fuel under the duty-free products covered by the statutory instrument was now being addressed by the Attorney-General’s Office.

However, investigations show that the AG’s office was not seized with the matter. This comes as it emerges that the Office of the President and Cabinet is trying to block an investigation of Sakunda Energy over its role in the controversial plant. The Independent has reported extensively on the Dema Emergency Power Plant which has an inflated cost structure. The cost of the Dema project escalated alarmingly from US$249 million to US$498 million over three years, after the government directed the controversial project’s managers to double its output to 200 megawatts at US$166 million per year at a time the country is failing to pay for power imports.

A parliamentary portfolio committee on mines and energy has visited the Dema project, Hwange and Kariba, among other power generation plants, to assess the situation.