IRIN Focus on the fuel crisis

Zimbabwe's economy faces collapse unless President Robert Mugabe's government addresses chronic fuel shortages threatening to shut down the country's industries, analysts told IRIN this week. John Makumbe, a political analyst at the University of Zimbabwe, told IRIN: "There is no quick fix solution to this fuel crisis. The shortages are likely to get worse as the country's oil procurement agency is heavily indebted to suppliers." The crisis started last December when oil suppliers cut credit lines to the National Oil Company of Zimbabwe (NOCZIM), the country's sole oil procurement agency, after it failed to service its debts due to a serious shortage of foreign currency. Economists said NOCZIM had accumulated debts of US $237 million to its suppliers, who then decided to limit supplies to Zimbabwe. "We have received reports of farmers laying off workers due to lack of diesel to operate their machinery," said Johannes Maronda of the Zimbabwe Consumer Council. Supplies insufficient A Mobil spokeswoman confirmed on Tuesday that about 10 million litres of diesel had arrived by pipiline from the Mozambique port of Beira. "However, the quantities are not sufficient to ease the shortages, which have become critical. The distribution networks are erratic and these hardly make a dent on the needs of consumers and business." She added that 10 million litres of diesel are only sufficient for three days, and can supply only a limited number of consumers. Petrol supplies are now reportedly running low in some areas, which has forced filling stations to ration consumers to about 20 litres each, according to the Consumer Council. Makumbe also said US $100 million which President Mugabe received from Libya last week would not alleviate the crisis. Trade Unions concerned Nomore Sibanda, a spokesman of Zimbabwe Congress of Trade Unions (ZCTU), told IRIN that the fuel shortage would hurt an economy already burdened by an inflation rate of about 60 percent and an unemployment rate of 45 percent. "Under-performing companies have started laying off workers because of the lack of fuel," he said. In the agricultural sector, the shortages have hit the tobacco industry, the country's main export earner. "Tobacco farmers have already lost markets because of the inability to transport the cured tobacco leaves to the airport for export. Dairy farmers have had to destroy thousands of litres of milk because they missed shipments to export markets," said a spokesman for the Commercial Farmers Union (CFU). He said that tobacco farmers cure an estimated 10,000 mt of tobacco leaves per week following the January harvest, and that the fuel shortages meant they could not ensure deliveries. He was concerned that Zimbabwean farmers would lose their export markets to competing countries because of the unreliability of the country's supplies. "The government has not told us when the situation will improve," he said. Private sector assistance Makumbe said the private sector had offered to run the fuel import industry, but the government has not responded positively to the proposal. The points of disagreement, according to analysts, are the controlled fuel prices and a shortage of foreign exchange. Economists said fuel prices would have to be increased by at least 25 percent if fuel imports are to be profitable - a situation which would trigger further price increases across the economy and possibly lead to unrest by the hard-pressed Zimbabwean consumers. Zimbabwe's economy has been in the doldrums since November 1997 following the devaluation of its currency by up to 75 percent against the US dollar. This led to a steep rise in the prices of commodities, which ignited mass demonstrations in urban centres of the country. The economic situation worsened in 1999 after the International Monetary Fund (IMF) suspended its aid package to the country arguing that Mugabe's government failed to implement the reform programme it had committed itself to. Other Western donors followed the IMF's lead and suspended their bilateral assistance to the country. NOCZIM blamed Analysts argue, however, that the fuel crisis is the worst to have hit Zimbabwe during Mugabe's 20-year rule. Said Makumbe: "The only way out of the crisis is for the entire NOCZIM management to quit. This crisis won't go away and the NOCZIM management is not capable of taking the country out of it." Sibanda said the manner in which NOCZIM has mismanaged the fuel industry will lead to the collapse of the economy. "Fuel is the backbone of any economy, and NOCZIM has been allowed to mismanage the industry for too long."