Did Renaissance Bank rescue the country in 2005?

Renaissance Bank, which almost collapsed last year and was rescued by the National Social Security Authority, may have rescued the country seven years ago.

According to a cable released by Wikileaks, the bank agreed to import three million litres of fuel to be delivered within a week. At the time, the country was dry.

The fuel was not much in terms of the country’s consumption patterns but this was a big deal because the country had failed to raise finance from other sources.

Though the National Oil Company of Zimbabwe which was in charge of procuring fuel was normally inefficient the United States embassy said the situation had been compounded by central bank governor Gideon Gono’s diversion of US$120 million which he siphoned to pay the International Monetary Fund.

Full cable:

Viewing cable 05HARARE1356, ZIMBABWE RUNNING ON EMPTY

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This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 03 HARARE 001356

SIPDIS

AF/S FOR B. NEULING

SENIOR AFRICA DIRECTOR C. COURVILLE

E.O. 12958: DECL: 09/30/2015

TAGS: ECON ENRG PGOV PREL ZI

SUBJECT: ZIMBABWE RUNNING ON EMPTY

REF: A. REF A: HARARE 1346

¶B. REF B: HARARE 1292

¶C. REF C: HARARE 1269

Classified By: Ambassador Christopher Dell for reasons 1.5 b/d

¶1. (C) Summary. Fuel supplies in Zimbabwe are at critical

levels as a result of the GOZ,s gross economic

mismanagement, forcing commuters and business to rely on the

black market if they want to remain mobile. Zimbabwe has

faced period fuel crunches for several years, but in the past

month supplies of the vital fluid have all but disappeared

from the formal market. Government attempts to revive fuel

deliveries have proved fruitless, with average commuters and

farmers paying the price. Nonetheless, Harare,s relatively

busy rush hour and the number of fuel hawkers testifies to

the resiliency of Zimbabwe,s black market. End Summary.

————————————-

Forex Squeeze Triggers Fuel Shortages

————————————-

¶2. (SBU) Zimbabwe has faced period fuel shortages for

several years, but the situation appears to have worsened

recently with the state-owned fuel distributor, National Oil

Company of Zimbabwe (NOCZIM), reportedly failing to deliver

fuel to the private sector for the past two months. Lines at

gas stations have lengthened in the past month, as drivers

begin to queue following even the slightest rumor of an

expected fuel delivery. Groups that had enjoyed special fuel

facilities supplied by NOCZIM have even run dry; most

recently Embassy contacts report the facility for medical

doctors ran out of fuel on September 28.

¶3. (SBU) The only gas stations with reliable supplies are

those owned by Caltex that sell fuel in exchange for hard

currency-denominated coupons. Under this scheme, Zimbabweans

with access to hard currency purchase the coupons at a rate

of US$0.90 per liter and then redeem them at eight special

Caltex stations nationwide. This system is frequently used

by Zimbabweans in the diaspora, who pay for the coupons and

then have relatives in Zimbabwe retrieve the vouchers. A

less reliable source of fuel are five stations nation-wide

allowed by the GOZ in July to sell fuel directly for hard

currency. These stations operate on a cash basis and lack

access to credit, making their supply stream haphazard.

Average stations that sell gas in local currency at the

official price of Z$23,300 per liter of diesel have probably

no hope of securing supplies in the foreseeable future,

despite the GOZ,s more than 100-percent price hike in early

September.

¶4. (C) While NOCZIM is widely viewed as one of the GOZ,s

worst-managed parastatals, the recent fuel crisis appears to

have been caused by the Reserve Bank,s recent squeeze on

foreign currency to pay $120 million to the IMF to avert

expulsion from that body. Like other oil importers,

Zimbabwe,s ability to import fuel is directly linked to its

export and foreign currency-generating potential. The

Reserve Bank,s theft of foreign currency accounts (ref C)

and maintenance of an overvalued exchange rate have caused

the present crisis, but an abysmal tobacco harvest and dim

prospects for turn-arounds in the agriculture and tourism

sectors suggest that recurrent fuel crises are likely to

continue indefinitely. The spokesman for the Petroleum

Marketers Association of Zimbabwe was recently quoted in the

press as saying, &the bottom line is that there is no

foreign currency and the situation is extremely bad.8

¶5. (C) The government, meanwhile, appears unable to address

either the short or long-term causes of the fuel crunch.

Incredulously, Mugabe told a group a war veterans on

September 28 that the fuel situation would improve in the

next few days, according to media reports. The GOZ appears

to be counting on securing bank credit to import fuel.

Embassy contacts report that the local Renaissance Bank has

agreed to finance 3 million liters of fuel to be delivered

within the next week. (N.B. Based on US Department of Energy

statistics for 2002, the 3 million liters will only satisfy

Zimbabwe’s demand for less than three days.) Meanwhile,

negotiations with South Africa,s Rand Merchant Bank have

stalled over the GOZ’s inability to provide collateral for

the loan, according to independent media reports. Recent GOZ

pronouncements in favor of seizing land and firms owned by

whites (ref A and B) further highlight the long road ahead to

revive exports.

————————

Sucking the Economy Dry(

————————

¶6. (SBU) The old adage that oil is the lifeblood of an

economy proves apt amidst Zimbabwe,s severe economic

contraction. The fuel shortages and price hikes for those

with access to fuel have been passed on to businesses and

ultimately consumers. Inflation, already officially clocked

at an annualized rate of 265 percent in August, is likely to

climb even more unless fuel prices are put in check. Local

economist John Robertson forecasts that annualized inflation

could peak at more than 1,000 percent in the second quarter

of next year unless the foreign currency shortage ) and

presumably the associated fuel shortages ) eases.

¶7. (SBU) No longer able to secure fuel at a preferential

government facility, commuter bus operators have begun to

pass along fuel price hikes to commuters. According to press

reports, bus fares have risen in lock-step with the GOZ,s

announced fuel price hike; fares from the high-density suburb

of Chitungwiza to the city center jumped from Z$11,000 to

Z$25,000 in early September. (N.B. The official exchange

rate is currently about Z$26,000:US$, while the parallel rate

continues to slide to about Z$85,000.) Some commuters unable

to afford the new rate have been stranded. The GOZ has

responded to these fair price hikes by forbidding transport

operators from increasing rates; according to a September 21

article in the Herald, police have fined some 770 bus drivers

for increasing fares without government approval.

¶8. (SBU) Agriculture is probably the sector most critically

affected, potentially sowing the seed for another failed

planting season and necessitating continued high levels of

donor assistance over the coming season (septel). With rains

expected to start in mid-October, now is traditionally the

time that farmers prepare their fields for planting and

purchase inputs to help their crops grow throughout the

season. The fuel crisis, however, has prevented some

distributors from transporting seed and fertilizers ) two

commodities also in short supply due to the lack of hard

currency ) to farms.

¶9. (SBU) Critical local services have also been affected by

the lack of fuel. Harare municipal clerk, Nomutsa Chideya,

told a parliamentary committee in mid-September that NOCZIM

had not delivered fuel to the city council in the past month,

according to press reports. Consequently, he reported that

the city had only enough fuel for one fire truck and that

&we have to pray there will not be a crisis.8 Officials in

Zimbabwe,s second city, Bulawayo, are also without fuel.

The opposition MDC Mayor Japhet Ndabeni-Ncube told reporters

on September 22 that the city,s entire fleet of municipal

vehicles was stranded and that only five of the city,s 12

ambulances were fueled.

————————–

(And Driving Black Market

————————–

¶10. (C) Nonetheless, there is no shortage of vehicles on

Harare,s streets, testifying to the resiliency and

pervasiveness of Zimbabwe,s black market; the Harare city

council has even publicly admitted to sourcing fuel on this

technically illegal market. Touters signaling fuel with the

&peace8 sign and young men carrying jerry cans abound on

certain Harare streets. Information compiled from local

Embassy staff paints a picture of how Harare residents are

coping with and even making a living off the country,s fuel

shortage. Recognizing the profit opportunities in this

shortage, local pundits have developed the term &individual

profit opportunities8 or IPOs to refer to money-making

schemes associated with fuel and other goods.

¶11. (C) The secondary market for Caltex fuel coupons appears

to be the most secure and sure way for small and medium-scale

peddlers to get fuel on the black market. In this scheme,

Zimbabwe,s enterprising residents ask family or friends

abroad to buy the coupons at US$0.90 per liter. The coupon

recipient can either purchase and resell the fuel on the

parallel market, or, if he does not want to deal with jerry

cans, trade the coupons for cash at more than Z$80,000 per

liter. By getting fuel coupons, the entrepreneur is no

longer forced to take receipt of foreign exchange funds from

abroad at the official exchange rate and thus almost triples

the local currency value of the transfer. Embassy contacts

report the market is flush with counterfeit Caltex coupons,

which only compound the shortage.

¶12. (C) Another, albeit less reliable, money-making scheme

is to use one of Zimbabwe,s six stations designated to

accept foreign currency ) no questions asked. With foreign

currency bought on the parallel market at about Z$85,000:USD,

an informal fuel trader can tank up at one of these stations

at a price of one US$ per liter (US$ 3.78 per gallon). The

newly minted entrepreneur can resell the fuel on the street

for as much as Z$150,000 per liter ) almost seven times the

newly increased official price of Z$23,300 per liter of

diesel – turning a profit of up to US$0.75 per liter on the

parallel market.

¶13. (C) Larger-scale farms and business, however, have more

complex ways of securing fuel, which involve ZANU-PF and

NOCZIM insiders, according to Embassy contacts. Under these

schemes, station owners with licenses to import fuel ) or

more commonly connections to someone with a license ) import

oil tankers from South Africa at a rate of US$0.32 per liter

at the border. These bulk dealers presell the fuel in large

volumes at a rate of Z$90-100,000 per liter, giving them a

profit margin of as much as US$0.85 per liter at the current

parallel market exchange rate.

——-

COMMENT

——-

¶14. (C) There is no end in sight to Zimbabwe,s recurrent

fuel crisis. The solution to intermittent fuel shortages

lies in overall economic turnaround, which is highly unlikely

given the GOZ,s refusal to reform. The GOZ, meanwhile, may

have a cynical reason to perpetuate the fuel shortage.

Access to fuel at cut-rate prices is almost certainly one of

ZANU-PF,s patronage tools; Policy Implementation Minister

Shamu, for instance, reportedly owns an indigenous oil

distribution company. The crippling fuel shortages only

reinforce the fact that ZANU-PF is the only game in town and

that defection means losing access to valuable patronage. As

with GOZ manipulation of the exchange rate, the fuel sector

is subject to perverse incentives. Preferential fuel rates

only divert effort to rent-seeking activities and give those

lucky enough to benefit a vested interest in maintaining

counterproductive economic policies.

¶15. (C) Testifying to Zimbabwean,s renowned passivity and

the GOZ,s heavy-handedness, the populous has trudged onward

with little overt protest against fuel shortages.

Nevertheless, the lack of fuel is an issue that impacts most

segments of society ) even soldiers and police have to queue

for ever longer periods of time to find transport. MDC

leader Morgan Tsvangirai has attempted to highlight the

GOZ,s shortcoming on this issue (septel), but it remains to

be seen if the gas shortages will ignite the populous’s

latent discontent against the regime.

DELL

(42 VIEWS)