ZERA conditions unfavourable – Zimbabwe fuel firms

Indigenous fuel companies have expressed concern over the conditions set by the Zimbabwe Energy Regulatory Authority (ZERA) for registration, saying they were stringent and meant to drive them out of business.

The companies, through the Indigenous Petroleum Association of Zimbabwe (IPAZ), said the conditions favoured large oil companies.

Zera last week announced fees, other conditions and the commencement of the licensing processes for this year in which they set out the requirements needed. The authority set the requirements for service stations that will sell fuel in foreign currency.

The fees ranges between $1 530 and $2 million, while other conditions are that a procurement company shall own at least 25 sites and should provide evidence of such ownership and that they should provide a performance bond with a value of $30 million before licensing.

On operation of Direct Fuel Imports (DFI), Zera announced that the petroleum company must be an owner of 25 fuel retail licences, should not have two or more fuel retail sites designated as DFI retail sites and each site must be in a different province.

Other requirements are that they should not apply for designation of a fuel retail site in each province, clear demonstration of possession of free funds must be provided and that if more than two applications are received per province, the two that offer the highest multiple of the fee of US$1 000 per site shall be awarded.

IPAZ, which has since written to Government contend that the requirements are more favourable to major oil companies and will drive them out of business.

There are six major oil-importing entities including IPAZ, Zuva Petroleum, Puma Energy, Total Zimbabwe, Petrotrade and Engen Petroleum Zimbabwe.

IPAZ is the largest importer of fuel, providing 11,7 million litres of diesel and eight million litres of petrol annually.

“The requirements set out are such that each oil company should have 25 service stations, this is firstly in contradiction to the Petroleum Act whereby an oil company is authorised to conduct bulk sales, not retail, hence the licence is referred to as a Procurement and Wholesale Licence,” IPAZ said.

On the performance $30 million bond, the association said indigenous companies combined had a network of approximately 260 service stations countrywide, placing their market presence at 42 percent.

“However, the volume of allocation received by these companies out of the $120 million said to be released each month, amounts to 1,7 percent,” it said.

“This has decapitalised and crippled a number of our companies where we are barely breaking even.”

In December, Government came to the rescue of indigenous fuel companies by issuing Letters of Credit (LCs) as it sought to improve the fuel supply situation, early enough for the Christmas season.

This came after the Zimbabwe Energy Regulatory Authority (ZERA) had advised the association’s members to form a consortium to boost their capacity to raise LCs.

An LC is a letter from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount.

The failure to raise LCs by indigenous players was one of the challenges that has resulted in the worsening fuel situation in the country.

 

Source: The Herald

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