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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