News from Zimbabwe

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Police seize fuel
BY GIFT PHIRI

HARARE - Police last Thursday seized more than 300,000 litres of fuel from private oil companies in the Southerton Industrial area accusing them of profiteering from long standing arrangements in which they buy fuel at subsidized prices from the state oil procurement monopoly, National Oil Company of Zimbabwe, NOCZIM.
The senseless blitz, led by one Inspector Munyakamwe, was aimed at forcing the private oil companies to sell fuel at the regulated price of $335 a litre although the dealers had bought the fuel at $540 a litre from NOCZIM while others had imported the precious commodity.
After years of acute fuel shortages, President Robert Mugabe three years ago deregulated fuel imports and demanded that private oil companies supply fuel from their external hard currency reserves.
Angry oil industry executives slammed the crackdown, which is being spearheaded by a taskforce created through the Soviet-style committees under the National Economic Development Priority Programme, saying it was unsustainable to sell fuel at loss.
The effect has been a deepening fuel crisis spawned by the shortages as private oil companies simply refused to sell their fuel at that price. Executives said privately the crackdown late Thursday caused disarray in the energy sector and has pushed up the price of fuel to as much as $1,200 a litre.
The crackdown also lent credence to reports that a deal with South Africa and Equatorial Guinea to provide $30 million worth of fuel a month for the next year was falling apart after Zimbabwe failed to pay arrears in shipping and handling costs.
The government has pegged the price at $335 in a bid to hold down inflation, now running at a record 1,200 percent in the nation’s worst economic crisis since independence in 1980.
Acute hard currency shortages since 1999 have led fuel stations to run dry, with long lines of cars regularly waiting for deliveries.
The hard currency shortages have pushed up the illegal black market exchange rate to more than 850 Zimbabwe dollars to one U.S. dollar, compared to the pegged official exchange rate of 250-1.
International oil companies have said they would need to buy hard currency at inflated rates of a blended mix between the official and unofficial rates to remain viable.
Civil unrest erupted three years ago when fuel was raised by 30 percent. Commuters boycotted transport firms and vehicles were stoned until fuel prices were reduced on government orders.
Back then, Mugabe said foreign oil companies would be required to use their external hard currency funds to import fuel, but oil companies insist that they must be allowed to remit some hard currency abroad to avoid being left with large amounts of Zimbabwe dollars in a hyperinflationary economy.
Mugabe described state fuel imports sold by foreign oil companies in Zimbabwe as “this game of foolery” that reaped huge profits for them and losses for the state.
Part of filling stations that lost huge amounts of fuel include Birmingham Road Motors which lost 10,000 litres, Muhammed Mussa which lost 40,000 litres, Caltex Coventry, among others.


Mathematical illusion and the slide into poverty
BY MFANDAIDZA HOVE

At independence in 1980, Zimbabweans enjoyed one of the highest standards of living in the region. In fact, we were three times as well off as the average citizen in Botswana. By 1990, our Gross Domestic Product per head was just under US$1,000. However, since 1999, this has fallen to less than US$400 and is expected to fall to US$350 per head by the end of 2006. Over 80% of Zimbabweans are now living on less than US$2 a day. The main reasons for this include the Government’s political illegitimacy, corruption and fiscal profligacy all of which have reduced all economic fundamentals to crisis levels.
This week’s release of the August Consumer Price Index (CPI) by the Central Statistical Office (CSO) revealing a sustained increase in inflation from 993.6% in July to 1,204.6% is further evidence of the continued economic meltdown.
According to the CSO, the month-on-month rate for August increased to 29.2% from 25.5% in July- an increase of 4.1%. On the face of it, this appears to be a modest change; however, this has very little bearing to the facts on the ground. Some of the issues that lead the nation to doubt the integrity of the inflation data released by the CSO include the following:
· The fact that the base year used is the Incomes, Consumption and Expenditure Survey of 2001- very unlikely to be representative of present trends;
· The extent (if any) to which parallel market exchange rates are taken into account in determining the monthly CPI. Given the fact that most producers access their foreign currency requirements through the parallel market, and consequently factor this in their pricing policies, failure to incorporate this into the monthly CPI casts serious doubts relating to its integrity.
In light of these doubts, the CSO’s calculations are a mathematical illusion and therefore fail to portray accurately the continued slide into poverty that the majority of Zimbabweans are experiencing.
The key issue to note is that for as long as this illegitimate government remains in power with the resultant pariah status that it has, the economic meltdown will continue. Consequently, hyperinflationary conditions will persist fuelled mainly by continued foreign exchange shortages, capacity utilization difficulties faced by the manufacturing sector, irresponsibly high budget deficits, increased central government borrowings on the domestic market and the illegal quasi-fiscal operations of the central bank.
The shortage of foreign exchange adversely affects the supply side of the economy in that this reduces output by the few producers that are still able to operate. Consequently, until a favourable business environment is restored, shortages will continue. An environment conducive to a functioning economy is one that enables business to generate foreign exchange through exports and one that attracts foreign direct investment, grants and loans. To the extent that the Zanu (PF) government has no capacity to address these basic issues, Zimbabweans cannot hope that a solution to this problem will be found in the foreseeable future.
We must point out that the crusade against the foreign exchange parallel market dealers is a futile exercise as the existence of such a market is a direct result of a dysfunctional economy. What is needed is a policy that addresses all economic fundamentals thereby ensuring that the incentives for the parallel market to exist are removed. Until this is done, the central bank will continue to address the symptoms and not the causes of the problem.
The scarcity of foreign exchange also results in concomitant shortages of fuel and other petroleum products all of which are imported. Since fuel is an important and significant input in the product cost build-up, any worsening supply of foreign exchange in the country leads to increases in the price of fuel. Such increases are, of course, subsequently factored in the prices of various products. Consequently, until industry and commerce can access fuel at affordable prices, hyperinflation will continue unabated.
A further major cause of inflation in this country, is government’s fiscal profligacy; the Zanu (PF) government is clearly unable/unwilling (or both) to live within its means. This is clearly demonstrated by the relentless increase in the budget deficits –a major source of inflationary pressures in this country. A more disturbing development is that these deficits are mainly financed by printing money, a major proportion of which goes in search of foreign exchange from the parallel market resulting in pressure on rates and the scarcity premiums there.
Finally, the quasi-fiscal activities of the central bank Governor are yet another major contributor to inflation in the country. The Governor continues to behave like a Prime Minister, dishing out printed worthless money across all sectors of the economy especially loss-making state-owned enterprises. The Governor needs to be reminded that the generally accepted view is that successful central bankers should be seen neither as heroes nor villains, but simply as competent referees, allowing the game to flow. – Hove is the MDC Secretary for Economic Affairs


City blames Zinwa

HARARE - In a move laden with hypocrisy, the City of Harare has released a damning report lambasting the Zimbabwe National Water Authority (Zinwa) for failing to provide clean water.
Ironically, the report by the illegally constituted commission-run municipality, comes barely six months after the parastatal took over water supplies for what they allege as: “… mainly because of the need to improve service delivery, which had deteriorated to unsustainable levels” said Zinwa’s weekly ‘What you should know column’ in the local media.
The report by the works department produced in December alleges that the water supplied by Zinwa continues: “to fail to meet the WHO (1993) guidelines and SAZ (1997) standards”.
The report adds: “Free residual chlorine is constantly low in the drinking water, viable counts (TVC) of bacteria and coniforms continue to be present in the drinking water. Toxin-producing blue-green algae is consistently present in the drinking water”.
The continued war of words by the two institutions comes after they have all failed to provide clean water to Harare metropolitan province. Harare supplies water to Norton, Ruwa and Chitungwiza among other cities.
The politically-motivated takeover of water supplies by Zinwa in May, raised questions at the parastetal’s capabilities to effectively manage the distribution of water. However, Zinwa has hit back saying the water treatment for Harare needs an ‘overhaul’ as it has become aged before they took over.
Perennial water problems have engulfed the city as the government-appointed commission bungled water treatment chemical tenders and unprofessional conduct to council business.
Recently, there was a dysentery outbreak in the province caused by the consumption of unsafe drinking water resulting in the loss of lives while many households went for weeks without water. – CAJ News