eBusiness Weekly
Tawanda Musarurwa
Zimbabwe’s fuel demand is still rather low to elicit full use of the Feruka Oil Pipeline, according to the Zimbabwe Energy Regulatory Authority (ZERA).
ZERA acting chief executive officer Misheck Siyakatshana says currently only 108 million litres of fuel imported into Zimbabwe is coming through the pipeline monthly, out of a possible 180 million litres.
“In terms of usage of the pipeline you will find that around 90 percent of the (imported) fuel is actually coming through the pipeline, it is very small quantities that are coming through road, that is, special fuels such as Jet1,” he recently told a Parliamentary Portfolio Committee on Mines and Energy.
“In terms of the capacity utilisation of the pipeline it depends on what demand there is in the country. The pipeline has a capacity of around 180 million litres per month, and the figures of 60 percent utilisation could be true simply because of low demand. We are not at a point where the demand requires full utilisation of the pipeline,” he said.
Zimbabwe needs about 1,5 million litres of petrol and 2,5 million litres of diesel per day.
And although some countries in the region, namely Zambia, the Democratic Republic of Congo, Botswana and Malawi collect some of their fuel from Zimbabwe, the volumes are still low to necessitate full utilisation of the Feruka pipeline.
Usage of the pipeline actually seems to be on the decline, despite the move by Government in 2011 to introduce a Fuel Pipe Line Levy of 4 US cents per litre on all fuel that is brought into the country by road to discourage transportation of fuel by road.
National Oil Infrastructure Company (NOIC) figures show that it pushed 1,3 billion litres of fuel through the Feruka Pipeline in 2016 compared to 1,53 billion litres in 2015, a decline of 14,4 percent over a 12-month period with 104 million being exported into the region compared to 209 million in 2015.
Paradox or no paradox?
Although ZERA claims that demand for fuel in the country is not at peak, Zimbabwe’s fuel imports account for over a quarter of total merchandise imports, a significant contributor to the overall negative trade balance.
Figures from the Reserve Bank of Zimbabwe (RBZ)’s latest “Total Merchandise Trade and Fuel Imports Statistics” report show that it allotted around $474 million for fuel importation during the first four months of 2018, a 23,7 percent increase from the $383,1 million allocated same period last year.
Zimbabwe’s fuel imports as a percentage of the country’s total merchandise imports were reported at 26,41 percent in 2015, according to the World Bank collection of development indicators.
And in 2016, the value for fuel imports as a percentage of merchandise imports in Zimbabwe was 28,84 percent. Over the past 32 years this indicator reached a maximum value of 42,50 percent in 2001 and a minimum value of 8,25 percent in 2002.
An analysis of figures provided by Worldatlas.com Zimbabwe is one of the world leaders in which fuel imports constitute the largest share of its total imports.
Fuels make up more than one-fourth of all imports in Belarus (31 percent), India (29 percent), Greece (27 percent) and Zimbabwe (26 percent).
However, the fact that Zimbabwe has more than 20 percent of its imports being comprised by fuel products can be a deceptively simple statement.
That’s because the “fuel products” category in exports accounts for more than just petroleum products. A deeper analysis of the country’s 2016 fuel imports shows that importers spent the most on the following 10 subcategories of mineral fuel-related products: processed petroleum oils ($1, 3 billion; electrical energy ($168, 5 million); petroleum gases ($19, 1 million); petroleum jelly, mineral waxes ($4, 9 million); coke, semi-coke ($3, 9 million); petroleum oil residues ($2, 2 million); coal, solid fuels made from coal ($1, 1 million); asphalt/petroleum bitumen mixes ($1 million); natural bitumen, asphalt, shale ($360 000), and peat ($349 000).
With respect to these fuel import subcategories, the country’s purchases of petroleum gases, which rose by 548 percent and peat (up 501 percent) between 2009 and 2016, highlight where the most robust demand is for the different types of imported fuel.
Artificial shortages
Although Zimbabwe’s demand for petrol and diesel are not adequate to elicit use full utilisation of the Feruka Pipeline, fuel dealers have been struggling to meet the existing demand due to foreign currency shortages.
A petroleum company that preferred anonymity said it’s only getting around 60 percent of its requirement for foreign currency to purchase,
“The reality of the matter is that foreign currency is in short supply, so if you look at us as the major oil companies we are not actually getting the full allocation we require. If I speak for my own company I’m probably getting about 60 percent of what we require on a weekly basis in terms of foreign currency,” said the company.
It added that — like many a fuel company in the country — it had adopted innovative ways to circumvent the problem, namely the use of letter of credit.
With a letter of credit a buyer’s bank can guarantee payment to a seller if certain criteria are met. LCs help reduce the payment risks on international trade transactions.
“We have a lot of traders who have set up letters of credit and through those LCs we are able to buy on local supply, and that’s how we have been able to supplement. But what has happened in the last few weeks is that some of the fuel available through LCs was not available, but some LCs are coming back again and that means there will be product that we can buy on local payment terms,” said the company.
The Feruka Oil Pipeline
The Zimbabwe Government controls 21 km of the Feruka line through the National Oil Infrastructure Company (NOIC), while Mozambique’s Companhiado Pipeline Mozambique-Zimbabwe company controls the rest.
The 408 km pipeline, was built in 1966 and originally stretched from Beira in Mozambique to Mutare and was later extended to Harare.
Petroleum products are transported into Zimbabwe through the Feruka pipeline and stored at Msasa and Mabvuku in Harare for distribution to other NOIC depots and customers.
