Felex Share Senior Reporter
The Reserve Bank of Zimbabwe has sealed a deal with local petroleum giant Sakunda Holdings that will see the firm supplying the country with 160 million litres of fuel to ensure adequate supplies during the festive season.
The deal, which became effective at the beginning of this month, was hammered under a structured facility in which Ecobank issued a letter of credit for $24 million to support Sakunda’s fuel imports.
The deal has been described as one of “the local solutions for local problems.”
Zimbabwe consumes 2.5 million litres of diesel and 1.5 million litres of petrol daily, and has to carefully manage import payments.
As a result, there has been panic stocking of the commodity by motorists and companies ahead of the festive season.
According to documents in possession of The Herald, Sakunda Holdings, which is also supporting Government’s Command Agriculture programme to the tune of $192 million, holds about 250 million litres of fuel stocks at Msasa depot and Feruka stores.
Reserve Bank of Zimbabwe Governor Dr John Mangudya said the central bank had agreed to the structure to ensure a smooth flow of fuel during the festive season.
“We would like to advise that we are agreeable for Sakunda to supply fuel to the following suppliers (Petrotrade, Engen, Total, RAM, Trek, ZX and others) under a structured facility in which Ecobank would issue a letter of credit for $24 million to support Sakunda’s fuel imports,” reads Dr Mangudya’s letter to Sakunda Holdings dated November 30, 2016.
“In addition, the bank is committed to provide an allocation of $4 million to Sakunda on a weekly basis for fuel supplies to augment the said LC facility. This structure is essential to ensure a steady supply of fuel within the economy over the festive season.”
Fuel is the biggest consumer of foreign currency in the country.
Every litre is imported except for ethanol from Chisumbanje.
In a correspondence to the RBZ, Ecobank said: “this facility will be 100 percent cash covered using Sakunda supplies’ credit balances, which they are failing to repatriate.”
RBZ sources yesterday said the deal would allay the fears for fuel shortages Zimbabweans had ahead of the festive season.
“There is currently panic stocking of fuel by motorists and many companies,” said the source. “Fuel importing now requires prepayment which strains RBZ’s foreign currency. A solution was required that fuel be available during the high demand period of December. To stabilise fuel supply, Sakunda is providing 80 million litres of fuel to the country this December and a similar amount in January. The fuel was made available immediately from that which Sakunda is already holding in stock.
“The local companies to get the fuel have a combined retail network that covers the whole country, these are companies that Sakunda typically supplies.”
Added the source: “On this arrangement, to supply the fuel upfront before any nostro payments were made, Sakunda needed approval from the RBZ of the $24 million deferred LC application. The LC will therefore cover future fuel deliveries and what was also needed was a commitment by us (RBZ) to pay $4 million per week to Sakunda for four weeks, which will replicate for the January 2017 fuel supplies. The benefits that came with this arrangement are that fuel was made available immediately and all fuel companies are being supplied resulting in all market players participating. There were also no upfront payments needed and there is also the use of bond notes by motorists to purchase fuel.
“With this arrangment, Sakunda will continue to ensure maximum use of the pipeline by replenishing the fuel supplied to the companies.”
Recently, Energy and Power Development secretary Mr Partson Mbiriri, said foreign currency shortages were affecting the importation of fuel.
“These (fuel) stocks are in bond, they belong to international oil traders, local companies buy from international traders for distribution on the local market. This requires foreign currency and local oil companies can only procure as much fuel in line with the foreign currency allocated to them,” he said.
Writing in Sunday Mail yesterday, Mr Mbiriri said reports that Zimbabwe was facing fuel shortages were “far-fetched”.
In case of emergencies, Mr Mbiriri said, the country also had fuel in its strategic reserves.
“That fuel and quantities stored elsewhere in Zimbabwe can reach any part of the country in a matter of hours, or a day at most, subsequent to payment,” he said.
“It is on the basis of these facts that I maintain that the alarm bells we have been hearing over the weeks are far-fetched, far from the truth. Zimbabwe has adequate stocks. The challenges are really about accessing fuel after payment.”