SA court hears how diesel consignment from oil firm BP to Zimbabwe ‘disappeared’

British oil company BP claimed to have exported a consignment of diesel to Zimbabwe in 2019 – but the fuel never arrived.

A case brought by the South African Revenue Service (Sars) in a South African court says that BP was paid the equivalent of US$12 million in tax rebates for a consignment of around 11.3 million litres of diesel that it claims to have exported to Zimbabwe. But a judge says there is no evidence that the diesel actually ever left South Africa.

Sars wants BP to pay US$15 million and says BP may have been duped by buyers in Zimbabwe who possibly diverted the diesel. High Court judge Stuart Wilson found that BP had no evidence that the diesel crossed the border: “Entirely absent from BP’s papers is a positive factual case that the diesel it said it sold to the Zimbabwean consignee actually crossed the border into Zimbabwe. The best evidence of that fact would have been an affidavit from the person who physically took the fuel across the border.”

According to the judge, “the fact is that no case has been made out that the diesel ever left the country, the commissioner has no record of it ever having done so, and everyone accepts that the document purporting to record the export is a forgery.” Sars plans to attach some BP properties over the case.

Under South African regulations, companies can claim refunds for excise duty, fuel levy and Road Accident Fund levies on fuel processed in SA but exported to other markets. BP has 50:50 joint venture with Shell in the SAPREF oil refinery in Durban.

Fueling corruption?

The case in South African courts points to the abuse of fuel trade channels by dealers in Zimbabwe. During the fuel crisis in 2019, many traders accessed US dollars at favourable exchange rates from official channels to order fuel, only to divert it to other markets. At Zimbabwe’s 2019 diesel consumption levels, the amount of fuel that “disappeared” in the BP case was enough to last four days.

Between 2017-2019, Zimbabwe’s annual fuel import bill averaged US$1.3 billion. In 2018, because of the exchange rate, fuel in Zimbabwe was selling at an effective 40 US cents, less than oil producing Angola. This attracted smugglers, who bought fuel in Zimbabwe and sold it elsewhere.

In 2020, government dropped subsidies on fuel and allowed USD market prices. This saw imports falling by 50% that year. While the dip was partly attributed to COVID lockdowns, industry players said the import bill may have been previously been inflated. They noted how the fuel import bill had been rising, while fuel queues remained.

In June 2020, 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.

“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.

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