Half tank: What caused the 50% plunge in Zimbabwe’s fuel import bill?

Queues disappeared in the second half of 2020, with consumption declining by more than 50%. REUTERS/Philimon Bulawayo

Zimbabwe’s fuel import bill fell by more than 50% in 2020, from US$1.2 billion the previous year. Figures recently released by the Zimbabwe National Statistics Agency (ZImstat), capturing data up to November, show that fuel imports amounted to US$499.19 million last year, a sharp decline from US$1.2 billion in 2019. Between 2017-2019, Zimbabwe’s annual imports averaged US$1.3 billion.

Several factors account for the dramatic decline.

Here, newZWire looks at the key factors behind the shift in Zimbabwe’s fuel consumption.

Lockdown downturn

The shutting down of much of the economy when the country went under lockdown early April could partly explain the fuel consumption pattern. Overall, the economy contracted by 7.5%, according to the government.

The first phase of the COVID-19 lockdown almost brought the economy to a halt, cutting April’s fuel consumption by half to 74 million litres from 143 million litres in March. 

However, 103 million litres of fuel were carted out of the reservoirs in Msasa in May, according to central bank data, more in line with the pre-lockdown monthly average consumption.

This was as the government gradually eased measures from the first ‘hard’ lockdown. The bounce in fuel consumption continued in June, as restrictions continued to be relaxed.

But July saw a collapse in fuel use, even as the country continued to open up, showing factors other than the lockdown had a greater bearing on volumes.

Removal of fuel subsidy

In December 2018, Zimbabwe’s monthly fuel consumption reached 210 million litres, double the previous year’s demand. At that time, the fuel price was around US$0.40 per litre in real terms, lower than what motorists in oil producer Angola were paying. Some bottled water brands became  more expensive than fuel, in one of the many absurd market distortions created by the fictitious exchange rate prevailing at the time.

Officials routinely attributed the surge in Zimbabwe’s fuel consumption, and attendant shortages, to an expanding economy. 

But energy analysts said much of that demand was artificial, driven by sub-economic prices. They also pointed out that because Zimbabwe’s fuel was cheaper compared to its neighbours, much of it was finding its way into the region through smuggling and cross-border truckers who preferred to fuel in the country. 

In October 2018, Zambian authorities intercepted 60 haulage trucks that had 1,800 litre ‘belly tanks’ fastened to their bodies. According to the Lusaka Times newspaper, the trucks were smuggling cheaper fuel into the country from the likes of Zimbabwe, where it cost the equivalent of 10 kwacha per litre, way below the 16 kwacha they would have to pay in Zambia.

This changed after June 2020, when Zimbabwe devalued its currency, removed the fuel subsidy and allowed forex sales for petrol and diesel. 

Fuel prices immediately went up by about 150%, with subsequent changes tracking an exchange rate now determined through weekly auctions.

Queues, which had seemed interminable for years, disappeared.

Currently, truckers avoid refuelling in Zimbabwe, as diesel is now more expensive here than in regional countries like Zambia and Mozambique.

Was RBZ ripped off by oil importers?

Some analysts believe the collapse in fuel consumption has laid bare an elaborate scheme by some oil marketing companies who might have fleeced the RBZ of millions of United States dollars under the subsidy scheme.

Through the scheme, fuel importers were allocated US dollars at favourable rates to procure petrol and diesel.

The seemingly endless shortages that dogged the economy since 2017 routinely raised suspicions that fuel importers were overstating their imports, under-supplying the market and siphoning off hundreds of millions of dollars allocated by the RBZ.

The Indigenous Petroleum Association of Zimbabwe (IPAZ), whose 77-members frequently complained they were overlooked by the central bank in its forex allocations, raised this red flag at a parliamentary committee hearing last June.

“In 2014, when our economy was growing, we brought in 123 million litres of fuel per month and all the service stations were not running dry,” IPAZ president Aaron Chinhara, whose Glow Petroleum is a major locally owned fuel retailer, told the parliamentary committee on energy.

“Today, the governor says he is importing 140 million litres per month. In 2014, we had a bigger economy, but 123 million litres per month were enough. The economy has shrunk, but it’s running dry on 140 million litres per month.” 

RBZ governor John Mangudya, who was in attendance, countered Chinhara’s assertion, saying there was proof of increased volumes of fuel actually coming into the country. But he, too, couldn’t explain the persistent shortages.

“Where is this fuel going?,” Mangudya queried.

While he admitted to several possibilities, including “invisible hands and indiscipline”, Mangudya refused to entertain the possibility of importers abusing forex by directing it away from fuel imports.

“There are too many grey areas and there is indiscipline, inefficiencies.”