PARLIAMENTARY COMMITTEE ON MINES AND ENERGY MONDAY FEBRUARY 7 PUBLIC HEARING SENATE CHAMBERS

USD4.4MILLION PAID TO NOAH TO IMPORT 5MILLION LITRES OF FUEL

THE CORREST FACTS; NEW COMPANY PETROLTRADE AND MINISTRY OF ENERGY IN USD4.4 FUEL DEAL WITH OUT FOLLOWING GOVERNMENT TENDER PROCEDURES  USEING USD6 MILLION AVAILED BY MINISTRY OF FINANCE FOR JANUARY 2011 FUEL CRISIS ALLIVIATION.  HON MINISTER OF ENERGY  AND PERMANENT SECRETARY ENERGY AND PETROTRADE CHIEF EXECUTIVE ARE  ACCOUNTABLE  AND MUST EXPLAIN TO THE NATION

1. House of Assembly (Parliament) passed the ENERGY REGULATORY BILL in December 2010. The Senate passed the ENERGT REGULATORY BILL on February 8, 2011 on their first sitting for 2011. The bill now has to go to the President for signing into law.

The Energy Regulatory bill among other energy regulatory measure legally enables the unbundling of NOCZIM in to two companies:

A)      PETROLTRADE which will takeover national fuel importation and NOCZIM service stations countrywide.

B)      NATIONAL OIL INFRUSTRUCTURE COMPANY OF ZIMBABWE (NOICZIM) which will take over oil infrastructure such as Masasa Storage Tanks, Mabvuku, Feruka and the oil pipeline from Harare to Feruka.

2. Before the Energy regulatory act is in force the Ministry of Energy and Power Development (The Minister and Permanent Secretary) have gone ahead to establish the two success companies, hired their Chief Executives, and made them operational. The Energy Regulatory Act only passed through Senate on February 8, 2010

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3. The Ministry of Energy sidelined NOCZIM the outgoing company which despite its fails has government procedures to follow when procuring fuel from international markets. Under NOCZIM there is a National Fuel Procurement Committee whose members are from major Zimbabwean oil companies, Noczim and Ministry. These adjudicate on the buying of imported fuel using fund from private companies paid for fuel orders. This Procurement Committee can only buy/import fuel from a list of Government Tender board approved reputable international oil supplying companies.
4. During the January fuel crisis, given that ZIMRA had rightfully garnished oil procurement funds from Oil companies in NOCZIM accounts for none payment of taxes. Ministry of Energy (Minister and Permanent Secretary) appealed to the Minister of Finance for such to urgently procure fuel to avert the January fuel crisis. The Ministry of Finance availed USD6million for emergency fuel procurement.
5. The Ministry of Energy in their wisdom decided to use the newly established PETROLTRADE whose management structures are not yet in place except its recently hired Chief Executive Mr. Revanewako. It procurement procedures and adherence to Government Tender procedures were not established. They decided PETROLTRADE must purchase emergency importation of fuel from NOAH a South Africa company that had promised them that they had fuel in Maputo Mozambique for immediate delivery in 48 hours. The Minister and Permanent Secretary of Energy decided not to follow government tender procedures and avoided using existing and legally approved structures. They paid NOAH USD4.4 million for importation and deliver in 48 hours 5 million litres of fuel from Mozambique.
6. NOAH the unknown company has not delivered the 5 million litres of fuel one month after and has not refunded the US$4.4 million.
7. Ministry as a good tax payer paid ZIMRA USD1.6million as duties, taxes and levies for the undelivered 5 million litres of fuel from NOAH that was never delivered.
8. In the Parliamentary Committee hearing the Permanent Secretary of Energy and Power Development told the committee that “We did misread at the time takabwayira” and hence lost the USD4.4 million.
9. The Minister of Energy and Power Development and Permanent Secretary of Energy and Power Development as accounting officer are responsible and accountable to people to Zimbabwe. They must explain their decision and recover the USD4.4 million which Ministry of Finance was hard pressed to find and support national fuel procurement at a crisis time.
10. The Parliamentary Committee asked the Permanent Secretary of Energy to submit in writing full detail on circumstance surround the selection of NOAH and payment of the USD4, 4 million to NOAH. Also explain the reason for using PETROLTRADE to procure national fuel at a time legal and management structure were not in place to support the new company operations. Failure to submit in writing the Committee will summon the Minister, Permanent Secretary of Energy and the Chief Executive of PETROLTRADE Mr. Revanewako to give evidence to the committee under oath. The Committee also expressed its displeasure at the fact that we are unbundling NOCZIM in order to develop institutional efficiency. Unfortunately greed and corruption is already destroying the new institutions PETROLTRADE and NOICZIM being established.

OTHER FACTS:

            STRATEGIC STOCK LEVY

This levy is levied on every imported litre of fuel to enable the nation to purchase strategic stocks for fuel and store them at Mabvuku Storage. Unfortunately, all levy funds were being use to procure fuel to repay Oil Companies whose fuel had been diverted by NOCZIM as well as paying for monthly pipeline charged which are based on moving 67million litres per month and a monthly charge of US$2.2million.

NOCZIM raise bank overdrafts to procure fuel and some of the overdrafts money was divert to pay for the US$2.2million pipeline usage. NOCZIM also divert fuel tax paid by oil companies to them for payment to ZIMRA and paid for pipeline usage.

ZIMRA decided to garnish NOCZIM bank accounts which house both NOCZIM funds as well as funds from oil companies that deposited funds for fuel importation. ZIMRA wanted to recover USD35 million in owed taxes and a penalty of USD51 million for none payment of taxes on time.

NOCZIM was and is still failing to move 67 million litres through the pipeline per month. However, the US$2.2 million is a fixed monthly pipeline charge.

STRATEGIC STOCKS

Mabvuku storage has capacity to hold 360 million litres of combined products. Currently the country uses an estimated and none quantified 2.5 million litres per day of combined products. If the economy was developing at its 1998 rate it is estimated we could be consuming 5 million litres of combined product per day. At 5 million litres per day Mabvuku storage could store 70 days of combined products.

CHALLENGE

Zimbabwe because of the state of its economy and current international isolation and sanctions is unable to access lines of credit from suppliers supported by international banks. Zimbabwe is procuring fuel on cash bases. Ideally, a nation must procure petroleum products on lines of credit with 90 day to 120 days or 210 days to pay.

The other option is for suppliers to move their stocks of fuel inland and store at Mabvuku. In this arrangement there must be guarantees that the National oil companies or its agents will not illegally release or divert the fuel. There is need to build confidence