Friday, 19 March 2021

MANGUDYA TAKES AIM AT OIL FIRMS ABUSING FOREX

A CRACK investigation that is meant to fish out and punish delinquent oil firms that have been accessing forex from the auction system and deploying it into backstage markets has kicked off, businessdigest can reveal.

In an interview this week, central bank boss John Mangudya said the Financial Intelligence Unit (FIU) had also zeroed in on cracking activities of oil firms that have been abusing Letters of Credit (LCs).

A letter of credit is issued by a bank to guarantee that a buyer’s payment will be received on time and for the correct amount. If the buyer defaults, the bank covers the full or remaining amount.

The Reserve Bank of Zimbabwe (RBZ) introduced LCs to ensure that fuel shipments are not disrupted as suppliers comb through records to verify the credibility of Zimbabweans petroleum dealers.

Under Zimbabwean policies, fuel companies that benefit from LCs and those that access funding from the foreign currency auction system are required to sell their products in Zimbabwe dollars.

However, the FIU has been told that fuel imported using auction funds has been traded in forex.

Businessdigest understands that the FIU is also investigating reports that forex generated from sales has been pumped into the black market where extortionist rates are charged to firms looking for forex.

These activities have been blamed for a sea of troubles that confront the economy today including rocketing basic commodity prices. This week, central bank insiders said the span of investigations was wide, as reports had indicated that the fuel companies at the centre of these vices had been evading paying taxes in foreign currency.

Zimbabwean policies say firms that trade in forex must remit taxes to the Zimbabwe Revenue Authority in foreign currency, while those generating the domestic currency pay in the local dollar.

Mangudya confirmed the investigations this week. “The malpractice or market indiscipline that you referred to is under investigation by the Financial Intelligence Unit,” the RBZ boss told businessdigest.

“Market indiscipline is always counterproductive and therefore requires us to continuously monitor it and bring the perpetrators to book by fining them and suspending them from accessing funds from the foreign currency auction system and/or LCs,” he said.

The RBZ last year instructed the Zimbabwe Energy Regulatory Authority (Zera) to register all fuel service stations that have free funds to import fuel for sale in forex.

But following the introduction of the auction system in June, these petroleum firms have also been queuing for forex, which means they have to trade in Zimbabwean dollars.

Mangudya said only a handful of LCs of less than US$10 million had been issued by banks in the past four months. This may mean that the majority of oil firms have been either queuing for forex at the auction system or undertaking Direct Fuel Imports.

The country’s fuel consumption per month averages 130 million litres, according to central bank data.

This week, Zera chief executive officer (CEO) Eddington Mazambani confirmed the central bank investigation. “Zera is in contact with the central bank and an exercise to reconcile the foreign currency allocated to fuel operators as well as the uplifts of fuel up to retail is underway. Operators who obtain foreign currency from the auction system should retail fuel in local currency,” Mazambani said.

Bart Mukucha, secretary-general of a group of petroleum firms called the Direct Fuel Imports group, said it was prudent that the central bank abandons issuing LCs and providing foreign currency to private entities due to rampant abuse.

He accused big petroleum firms of abetting the malpractice. “It defeats logic for the RBZ to give assistance of this type to foreign companies. They are better off assisting the government’s own companies such as Petrotrade, Genesis Energy and CMED Fuels,” Mukucha said.

“They control these companies and they can be trusted to toe the line. Some of the foreign companies being assisted are richer than the government of Zimbabwe. By giving these LCs to these government companies, the issue of ‘indiscipline’ in the sector will varnish.”

Contacted for comment Total Zimbabwe human resources manager Rumbidzai Ndavambi said; “Total Zimbabwe is currently communicating with Zera on the same, so we are unable to comment at this stage.”

Zuva Petroleum CEO Bethwell Gumbo said; “We are not accessing LCs at the moment. We last had LCs over a year ago.”

Questions sent to Vivo Energy, operating the Engen franchise, had not been responded to at the time of publishing. Zimbabwe Independent

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