Black market fuel sales and fear: Zimbabwe faces economic fallout

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Black market fuel sales and fear: Zimbabwe faces economic fallout

3:14 CAT | 17 Oct 2018

Men push their truck outside Delta Beverages in Bulawayo, opting to wait overnight in a queue although their car had run out of diesel [Tendai Marima/Al Jazeera]

There are snaking queues at Zimbabwe’s petrol stations, supermarkets and factories as shoppers and motorists line up for scarce supplies.

With Zimbabwe struggling to find a way to repay its foreign debtors and curb domestic spending, there are fears the country is slipping back into crisis mode.

For days, some shops have closed, with signs on their doors such as “closed for stocktaking”. Others are open but their prices are rising.

At the Delta Beverages depot, a distributor of Coca-Cola and other drinks, overnight queues have become the norm.

Gilbert Gono, 37, a businessman who owns several small bars, told Al Jazeera he had queued overnight on two occasions waiting to buy 60 crates of soft drinks and beer.

“I had to sleep in the queue twice [last] week, but … things are not moving.

“I’m here with the crates, but they’re empty and on the ground, nothing is happening. My customers are there [at the bar] but they can’t get the product. It’s as good as saying the shop is closed,” he complained.

Although manufacturers of basic commodities such as cooking oil and soap say they have enough to supply the country throughout October, panic buying has forced some shops to raise prices and limit customer purchases to one of each item.

Black market sales

The government recently announced spending $40m of fuel, but scarcities persist.

Erratic supply has seen many stations run dry, particularly at the weekend, but some Zimbabweans are taking advantage of the situation. Trading fuel on the black market trade has become one way to combat the crisis, providing a costly alternative to motorists.

On a dusty plain, three young men sell fuel from the boot of their car.

*Gilbert Gono waits in line for his turn to buy drinks at the Delta Beverages depot in Bulawayo [Tendai Marima/Al Jazeera]*

When they began their trade a few weeks ago, the price of petrol was nine dollars a litre, but charges jumped from nine dollars to $12 and then $15 in cash or $18 in mobile money.

Fuel sold out of a car boot costs more than twice as much as the regular rate of $1.45, while diesel sells at two dollars a litre against market prices of $1.34.

“Things are tough for everyone and selling fuel is our way of doing something, we have to find a way to survive. If there is no fuel in the market people can come to us,” said Vusa Ncube, one of the three black market sellers.

“The price has to go up because we are in a desperate situation, it’s not cheap but that’s the situation we’re living in.”

Ncube’s supply is sourced locally and when demand peaks, the trio makes at least $500 a day.

*A man carries a can of fuel back to his truck after buying five litres of diesel in cash on the black market in Bulawayo, Zimbabwe [Tendai Marima/Al Jazeera]*

Although the government has warned against unlicensed fuel sales, the trade continues outside petrol stations, in alleyways and along busy roads in suburban areas.

Thabani Mlilo, a 36-year-old fuel seller who hires out jerry cans to motorists in the city centre, told Al Jazeera there was little the government could do to stop him.

“If someone comes and they are desperate because they have no fuel in their car, I have to sell to them, where else can they find that petrol or diesel? Where else can they get that jerry, if I don’t give to them?

“It’s the way things are now, so they (the government) can’t tell people stop something if they don’t give them what they are looking for.”

Mlilo hires out his jerry cans and funnels for one dollar and, although by law, only metal containers are permitted, he also loans out five-litre plastic cans for 50 cents.

Mnangagwa: There are no quick fixes

President Emmerson Mnangagwa, who narrowly won a disputed election in July, has called for calm and assured the nation that although there is no swift remedy to the liquidity problems, the state has the situation under control.

“Whatever some may claim, there are no silver bullets or quick fixes. There is no need to panic, and government is guaranteeing the availability of all essential commodities, including fuel,” he said in a statement on Tuesday.

The 75-year-old succeeded Robert Mugabe, 94, in a military-assisted takeover last November.

*A fried chicken shop closes for business partly due to problems in securing forex to import its main product – chicken from South Africa [Tendai Marima/Al Jazeera]*

Although Mugabe’s former protege has promised a new era of prosperity, the country’s economic woes have worsened in recent months and there are fears of a return to the hyperinflation of the 2000s.

Under Mugabe, hyperinflation caused by the collapse of the agricultural industry and excessive printing of money led to the crash of the local Zimbabwe dollar in 2009.

With one of the highest inflation rates in history, and a worthless currency with a hyperinflation value of over 89.7 sextillion percent, the country adopted multiple currencies and mainly uses the US dollar in daily use.

However, chronic dollar shortages forced the government to introduce a local equivalent known as the bond note, which was introduced in 2016.

But because the supply of the bond note is limited and the market responses to the bond have been negative, the surrogate currency is not seen as equal to the US dollar.

Amid the current uncertainty, the rate of the dollar on the black market has risen.

New tax divides opinion

Fears were stoked during an announcement earlier this month of the mid-term monetary policy statement and a new transaction tax.

From October 1, a two percent charge is fixed on every electronic dealing, whether using mobile money or the banking system.

The move has met strong resistance and threats of protests by labour movements.

*Cars pack a petrol station in Bulawayo’s city centre, trying to get diesel as Zimbabwe faces severe fuel shortages [Tendai Marima/Al Jazeera]*

Opposition parliamentarian and former Minister of Finance Tendai Biti, who oversaw Zimbabwe’s transition to a multiple currency system during a government of national unity between the ruling ZANU-PF and opposition Movement for Democratic Change, criticised the introduction of bond notes and said he expected more instability with the introduction of the tax.

“This regime is absolutely clueless on how to tackle this crisis; the new tax is a way of declaring war on the poorest citizens of this country. We cannot tolerate this, it’s an unjust way of taxing people and creating more panic in the market, no investor will come here under these conditions,” he said.

However, some advocates of the new tax system say it will broaden the tax base and raise much-needed revenue for the government.

Economist and former opposition parliamentarian Eddie Cross told Al Jazeera that despite panic, the new measures could eventually lead to stability.

“There’s no way we could have avoided this because we’ve got a high proportion of our economy that’s informal, so we have to tax that sector. The new tax taxes everybody and I think it’s a much more equitable tax than the tax on incomes.

“This (transaction tax) is a stabilisation measure, but we have to move to the next phase where we can fix pricing relationships and stop the hikes,” he said.

Source: Al Jazeera