Renaissance Bank, which almost collapsed last year and was rescued by the National Social Security Authority, may have rescued the country seven years ago.
According to a cable released by Wikileaks, the bank agreed to import three million litres of fuel to be delivered within a week. At the time, the country was dry.
The fuel was not much in terms of the country’s consumption patterns but this was a big deal because the country had failed to raise finance from other sources.
Though the National Oil Company of Zimbabwe which was in charge of procuring fuel was normally inefficient the United States embassy said the situation had been compounded by central bank governor Gideon Gono’s diversion of US$120 million which he siphoned to pay the International Monetary Fund.
Full cable:
Viewing cable 05HARARE1356, ZIMBABWE RUNNING ON EMPTY
If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs
|
Reference ID |
Created |
Released |
Classification |
Origin |
This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 03 HARARE 001356
SIPDIS
AF/S FOR B. NEULING
SENIOR AFRICA DIRECTOR C. COURVILLE
E.O. 12958: DECL: 09/30/2015
SUBJECT: ZIMBABWE RUNNING ON EMPTY
REF: A. REF A: HARARE 1346
¶B. REF B: HARARE 1292
¶C. REF C: HARARE 1269
Classified By: Ambassador Christopher Dell for reasons 1.5 b/d
¶1. (C) Summary. Fuel supplies in Zimbabwe are at critical
levels as a result of the GOZ,s gross economic
mismanagement, forcing commuters and business to rely on the
black market if they want to remain mobile. Zimbabwe has
faced period fuel crunches for several years, but in the past
month supplies of the vital fluid have all but disappeared
from the formal market. Government attempts to revive fuel
deliveries have proved fruitless, with average commuters and
farmers paying the price. Nonetheless, Harare,s relatively
busy rush hour and the number of fuel hawkers testifies to
the resiliency of Zimbabwe,s black market. End Summary.
————————————-
Forex Squeeze Triggers Fuel Shortages
————————————-
¶2. (SBU) Zimbabwe has faced period fuel shortages for
several years, but the situation appears to have worsened
recently with the state-owned fuel distributor, National Oil
Company of Zimbabwe (NOCZIM), reportedly failing to deliver
fuel to the private sector for the past two months. Lines at
gas stations have lengthened in the past month, as drivers
begin to queue following even the slightest rumor of an
expected fuel delivery. Groups that had enjoyed special fuel
facilities supplied by NOCZIM have even run dry; most
recently Embassy contacts report the facility for medical
doctors ran out of fuel on September 28.
¶3. (SBU) The only gas stations with reliable supplies are
those owned by Caltex that sell fuel in exchange for hard
currency-denominated coupons. Under this scheme, Zimbabweans
with access to hard currency purchase the coupons at a rate
of US$0.90 per liter and then redeem them at eight special
Caltex stations nationwide. This system is frequently used
by Zimbabweans in the diaspora, who pay for the coupons and
then have relatives in Zimbabwe retrieve the vouchers. A
less reliable source of fuel are five stations nation-wide
allowed by the GOZ in July to sell fuel directly for hard
currency. These stations operate on a cash basis and lack
access to credit, making their supply stream haphazard.
Average stations that sell gas in local currency at the
official price of Z$23,300 per liter of diesel have probably
no hope of securing supplies in the foreseeable future,
despite the GOZ,s more than 100-percent price hike in early
September.
¶4. (C) While NOCZIM is widely viewed as one of the GOZ,s
worst-managed parastatals, the recent fuel crisis appears to
have been caused by the Reserve Bank,s recent squeeze on
foreign currency to pay $120 million to the IMF to avert
expulsion from that body. Like other oil importers,
Zimbabwe,s ability to import fuel is directly linked to its
export and foreign currency-generating potential. The
Reserve Bank,s theft of foreign currency accounts (ref C)
and maintenance of an overvalued exchange rate have caused
the present crisis, but an abysmal tobacco harvest and dim
prospects for turn-arounds in the agriculture and tourism
sectors suggest that recurrent fuel crises are likely to
continue indefinitely. The spokesman for the Petroleum
Marketers Association of Zimbabwe was recently quoted in the
press as saying, &the bottom line is that there is no
foreign currency and the situation is extremely bad.8
¶5. (C) The government, meanwhile, appears unable to address
either the short or long-term causes of the fuel crunch.
Incredulously, Mugabe told a group a war veterans on
September 28 that the fuel situation would improve in the
next few days, according to media reports. The GOZ appears
to be counting on securing bank credit to import fuel.
Embassy contacts report that the local Renaissance Bank has
agreed to finance 3 million liters of fuel to be delivered
within the next week. (N.B. Based on US Department of Energy
statistics for 2002, the 3 million liters will only satisfy
Zimbabwe’s demand for less than three days.) Meanwhile,
negotiations with South Africa,s Rand Merchant Bank have
stalled over the GOZ’s inability to provide collateral for
the loan, according to independent media reports. Recent GOZ
pronouncements in favor of seizing land and firms owned by
whites (ref A and B) further highlight the long road ahead to
revive exports.
————————
Sucking the Economy Dry(
————————
¶6. (SBU) The old adage that oil is the lifeblood of an
economy proves apt amidst Zimbabwe,s severe economic
contraction. The fuel shortages and price hikes for those
with access to fuel have been passed on to businesses and
ultimately consumers. Inflation, already officially clocked
at an annualized rate of 265 percent in August, is likely to
climb even more unless fuel prices are put in check. Local
economist John Robertson forecasts that annualized inflation
could peak at more than 1,000 percent in the second quarter
of next year unless the foreign currency shortage ) and
presumably the associated fuel shortages ) eases.
¶7. (SBU) No longer able to secure fuel at a preferential
government facility, commuter bus operators have begun to
pass along fuel price hikes to commuters. According to press
reports, bus fares have risen in lock-step with the GOZ,s
announced fuel price hike; fares from the high-density suburb
of Chitungwiza to the city center jumped from Z$11,000 to
Z$25,000 in early September. (N.B. The official exchange
rate is currently about Z$26,000:US$, while the parallel rate
continues to slide to about Z$85,000.) Some commuters unable
to afford the new rate have been stranded. The GOZ has
responded to these fair price hikes by forbidding transport
operators from increasing rates; according to a September 21
article in the Herald, police have fined some 770 bus drivers
for increasing fares without government approval.
¶8. (SBU) Agriculture is probably the sector most critically
affected, potentially sowing the seed for another failed
planting season and necessitating continued high levels of
donor assistance over the coming season (septel). With rains
expected to start in mid-October, now is traditionally the
time that farmers prepare their fields for planting and
purchase inputs to help their crops grow throughout the
season. The fuel crisis, however, has prevented some
distributors from transporting seed and fertilizers ) two
commodities also in short supply due to the lack of hard
currency ) to farms.
¶9. (SBU) Critical local services have also been affected by
the lack of fuel. Harare municipal clerk, Nomutsa Chideya,
told a parliamentary committee in mid-September that NOCZIM
had not delivered fuel to the city council in the past month,
according to press reports. Consequently, he reported that
the city had only enough fuel for one fire truck and that
&we have to pray there will not be a crisis.8 Officials in
Zimbabwe,s second city, Bulawayo, are also without fuel.
The opposition MDC Mayor Japhet Ndabeni-Ncube told reporters
on September 22 that the city,s entire fleet of municipal
vehicles was stranded and that only five of the city,s 12
ambulances were fueled.
————————–
(And Driving Black Market
————————–
¶10. (C) Nonetheless, there is no shortage of vehicles on
Harare,s streets, testifying to the resiliency and
pervasiveness of Zimbabwe,s black market; the Harare city
council has even publicly admitted to sourcing fuel on this
technically illegal market. Touters signaling fuel with the
&peace8 sign and young men carrying jerry cans abound on
certain Harare streets. Information compiled from local
Embassy staff paints a picture of how Harare residents are
coping with and even making a living off the country,s fuel
shortage. Recognizing the profit opportunities in this
shortage, local pundits have developed the term &individual
profit opportunities8 or IPOs to refer to money-making
schemes associated with fuel and other goods.
¶11. (C) The secondary market for Caltex fuel coupons appears
to be the most secure and sure way for small and medium-scale
peddlers to get fuel on the black market. In this scheme,
Zimbabwe,s enterprising residents ask family or friends
abroad to buy the coupons at US$0.90 per liter. The coupon
recipient can either purchase and resell the fuel on the
parallel market, or, if he does not want to deal with jerry
cans, trade the coupons for cash at more than Z$80,000 per
liter. By getting fuel coupons, the entrepreneur is no
longer forced to take receipt of foreign exchange funds from
abroad at the official exchange rate and thus almost triples
the local currency value of the transfer. Embassy contacts
report the market is flush with counterfeit Caltex coupons,
which only compound the shortage.
¶12. (C) Another, albeit less reliable, money-making scheme
is to use one of Zimbabwe,s six stations designated to
accept foreign currency ) no questions asked. With foreign
currency bought on the parallel market at about Z$85,000:USD,
an informal fuel trader can tank up at one of these stations
at a price of one US$ per liter (US$ 3.78 per gallon). The
newly minted entrepreneur can resell the fuel on the street
for as much as Z$150,000 per liter ) almost seven times the
newly increased official price of Z$23,300 per liter of
diesel – turning a profit of up to US$0.75 per liter on the
parallel market.
¶13. (C) Larger-scale farms and business, however, have more
complex ways of securing fuel, which involve ZANU-PF and
NOCZIM insiders, according to Embassy contacts. Under these
schemes, station owners with licenses to import fuel ) or
more commonly connections to someone with a license ) import
oil tankers from South Africa at a rate of US$0.32 per liter
at the border. These bulk dealers presell the fuel in large
volumes at a rate of Z$90-100,000 per liter, giving them a
profit margin of as much as US$0.85 per liter at the current
parallel market exchange rate.
——-
COMMENT
——-
¶14. (C) There is no end in sight to Zimbabwe,s recurrent
fuel crisis. The solution to intermittent fuel shortages
lies in overall economic turnaround, which is highly unlikely
given the GOZ,s refusal to reform. The GOZ, meanwhile, may
have a cynical reason to perpetuate the fuel shortage.
Access to fuel at cut-rate prices is almost certainly one of
ZANU-PF,s patronage tools; Policy Implementation Minister
Shamu, for instance, reportedly owns an indigenous oil
distribution company. The crippling fuel shortages only
reinforce the fact that ZANU-PF is the only game in town and
that defection means losing access to valuable patronage. As
with GOZ manipulation of the exchange rate, the fuel sector
is subject to perverse incentives. Preferential fuel rates
only divert effort to rent-seeking activities and give those
lucky enough to benefit a vested interest in maintaining
counterproductive economic policies.
¶15. (C) Testifying to Zimbabwean,s renowned passivity and
the GOZ,s heavy-handedness, the populous has trudged onward
with little overt protest against fuel shortages.
Nevertheless, the lack of fuel is an issue that impacts most
segments of society ) even soldiers and police have to queue
for ever longer periods of time to find transport. MDC
leader Morgan Tsvangirai has attempted to highlight the
GOZ,s shortcoming on this issue (septel), but it remains to
be seen if the gas shortages will ignite the populous’s
latent discontent against the regime.
DELL
(42 VIEWS)
0 Comments