You can almost forget that the long queues that you witness close to service stations are an indication that something is amiss. This is because the queues are more like a norm now. They disappear only for a few days, only to resurface again and again. These are signs of a country which is struggling to deal with crippling fuel challenges once and for all. In this article we ask, what has gone wrong again? What will it take to come out of these persistent fuel shortages?

Interventions by government

Fuel has long been listed as one of the most critical commodities alongside medicine and others. This has resulted in government offering some kind of subsidies or assisting the sector in one way or the other over the years. This is largely justifiable. Fuel does drive the economy, literally. It is no surprise, therefore that fuel has continued enjoying the protectionist foreign currency allocations by the Reserve Bank of Zimbabwe (RBZ) despite the glaring truth that the sustainability of such an arrangement remains highly questionable. A 150% fuel price hike in January this year seemed to have done the trick. Fuel queues soon disappeared although some argued that this happened because fuel was now priced beyond the reach of many and they resorted to dumping their cars in favour of public transport.

The relief that this brought was short lived. The Monetary Policy Statement (MPS) which introduced the interbank foreign currency exchange market also looked like a viable panacea. Pressure for forex at the Reserve Bank of Zimbabwe (RBZ) would decrease as some companies and individuals would look to banks and Bureaux de Change for their forex needs. That too has not made much of difference so far because fuel queues are still long and winding. Perhaps if big companies start procuring and importing their own fuel, the problem will finally end. At least this is what has come out of the last Cabinet session. Government interventions have been chopped and changed but fuel queues are still a permanent eyesore daily.

Mistake or incompetence?

Just four days after the MPS announcement, government gave another baffling excuse. The Ministry of Information, Publicity and Broadcasting Services tweeted saying, “Govt (government) apologise for the logistical glitch which resulted in fuel retailers ordering more petrol than diesel giving rise to diesel shortages. The situation has been attended to and normalcy in the fuel retail sector is expected to have been attained within the next few hours.” As we all know, the few hours became days and weeks. True, diesel was scarcer. However, petrol also became scarce despite that more of it had been ordered. It is therefore difficult to believe that this was a genuine mistake or it was mere incompetence. Today, both diesel and petrol are hard to come by. Only those service stations selling in foreign currency always have it. But foreign currency too, remains scarce and salaries are mostly in the local RTGS Dollar.

Fuel prices

The other issue is that our fuel has always been one of the cheapest in the region. Before the last price increase, our petrol was selling at Bond $1.31 and this translated to just around US 40 cents. This was untenable. Average petrol prices worldwide are around US$1.10 while diesel is around US$1.04. But our problem was that government remained fixated on a fictitious 1:1 rate between the Bond Note and the US Dollar. Using that rate, our petrol cost US$1.31. This was far from reality on the ground. Now, at RTGS $3.35 for petrol and RTGS $3.15 for diesel, we are probably within range of what others are charging worldwide. Our pricing model is totally different from what neighbouring countries do. In South Africa, fuel prices are affected by world oil prices so when those prices fall or rise, fuel prices follow suit. One such movement was an increase in both petrol and diesel prices which took effect on 6th March 2019. This pricing model may be more worthwhile in our case because it responds to market forces.

Trust issues

After the MPS, Zimra now uses the bank rate (currently around 1:2.5) to charge duty for fuel and other goods. This is likely to affect the overall price of fuel even more as the cost of importing will increase. This is a no brainer. However, government insists that no price increase is in the pipeline. While this is happening, some retailers are suspected to be holding onto their fuel in anticipation of price increases which, in all fairness, look inevitable. This withholding may be causing artificial shortages. In any case, trust between government and its citizens continues to wane. Every announcement that government makes is taken with a pinch of salt. On the other hand, government blames peddlers of falsehoods on social media who have prematurely announced that there are plans in motion to increase fuel to around RTGS $5.50 per litre.  According to government, this is what has caused artificial fuel shortages due to panic buying and withholding of fuel. As an ordinary citizen, you choose what you want to believe.

The long queues continue to tell us that we certainly have a problem on our hands. A lasting solution is needed because all this uncertainty leaves everyone anxious, including would-be investors. Businesses need a consistent supply of fuel. So too do individuals.