Stringent regulations for U.S. dollar denominated fuel in Zimbabwe

The Zimbabwe Energy Regulatory Authority (ZERA) has warned fuel companies that have been granted approval to sell fuel in US dollars that their licences risk being cancelled if they divert from the set regulations.

This is to ensure that the DFI scheme is not abused but improves the availability of fuel in the country.

Last month the Reserve Bank of Zimbabwe (RBZ) gave ZERA exchange control approval to receive applications from fuel companies that have free funds for direct imports to be sold in foreign currency.

Said RBZ governor Dr John Mangudya last month:

“We are waiting for ZERA to ensure that they register or designate service stations that will be selling in foreign currency so that there will be efficiency in terms of transparency, monitoring and books.

“Oil marketing companies are going to apply to ZERA so that they will be registered to sell to people with free funds.

“Just like the passports, if you have the money (US dollars) you can pay to get your passport,” the governor added.

Since then, ZERA has been on the move to register as many petroleum companies as possible to ensure availability of the commodity as well as reduce the problems associated with its shortage in the country.

The regulator has requested all interested operators to submit their applications to be considered for licensing to sell fuel in foreign currency.

In an interview with Finance & Business, ZERA acting chief executive Edington Mazambani said:

“Regulations are in place and any violation of the facility will result in cancellation of the licence.”

He added that some of the key conditions that they expect companies licensed to sell in fuel in forex to meet are a ZERA designated site, a proof of funding to demonstrate that the funds used to procure fuel is from free funds.

“The licensee will also show a firm confirmation or contract with suppliers of fuel to ensure continuous supply.

“A site that will be granted the licence to sell in forex is one which was licensed in the past after passing the necessary checks or one which is licensable. All fuel related duties at a site designated to sell in foreign currency will be paid in forex as well,” said Mr Mazambani.

However, ZERA said it is yet to decide the number of stations per petroleum firm it will allow to sell in foreign currency as it is still compiling applications from the received submissions.

Mr Mazambani said the detailed analysis and classification of sites to be licensed by province and town will be availed in due course.

Meanwhile, ZERA lauded RBZ’s move saying it is certain that it will improve the availability of fuel in the country.

“The facility will enable operators with free funds to use their resources to bring in fuel into the country which will result in improved supply and the main market of the DFI facility are individuals and companies with free funds and foreign currency earners,” Mr Mazambani added.

Although economic analyst Dr Gift Mugano shares the same view with ZERA, his view is that the move sends conflicting signals on the de-dollarisation issue.

“Yes the move guarantees availability of fuel because it’s opening everyone to come and participate in the mobilisation of resources to fund the importation of fuel. But it reinforces re-dollarisation,” he said.

Government banned the use of foreign currency for local transactions last year and legalised the Zimbabwean dollar, as the sole legal tender, through Statutory Instrument 142 of 2019, after it had replaced it by the United States dollar (USD) in 2009, in a bid to de-dollarise the country’s economy.

However, the central bank has so far given special dispensation to a number of entities and sectors to charge for their products in foreign currency.

 

Source: The Herald

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