When we first heard that the government in the person of the Zimbabwe Regulation Authority was planning on selling fuel in Zimbabwean dollars we scoffed. I mean the government has tried to do this countless times and failed why would this time be different? Now ZERA has just announced that the government is doubling down and will increase the service stations from the current 57.
A different strategy
Well, there was one big difference with the current plan, the government set aside 57 service stations to exclusively sell in ZWL dollars. That strategy might be the reason why even though it has been unsuccessful in changing the USD-only fuel status-quo, the plan hasn’t gone down in flames yet.
Before all this, the government would give service stations foreign currency to import fuel. They would then ask the service stations to sell this fuel in ZWL or USD at the official rate. The service station would be free to sell fuel they imported using their own “free” funds in USD at their desired prices. The service stations would simply sell very little fuel in USD and give the government back its money while pocketing profits made from exploiting the arbitrage opportunities between the official and black-market rates.
This strategy sort of muddied the waters when it came to accounting for which fuel had been bought with what funds. Service stations ruthlessly exploited that murky situation with most selling exclusively in USD despite benefiting from the auction. By setting aside service stations that sell exclusively in USD there is at least some chance for the government to audit and see if a given service station is not exploiting said arbitrage opportunities.
Doubling down, will it work?
Expectation is that more sites will be taken on board once the project gathers momentum. The current number of service stations accepting local currency translates to the number of service stations that have access to the RBZ fund to procure fuel that will be sold in local currency.
ZERA CEO
Again ZERA is doubling down and introducing more service stations. How have the current service stations fared so far? I will be honest I don’t know. Neither anyone I know nor myself have been able to buy ZWL fuel mostly because most people haven’t tried. The thing though is that people wouldn’t be flocking to USD stations that are selling fuel at more than US$1.30 if they would get it for half the price in ZWL.
Unless you are well connected or have nothing to do but stay in line for hours you are unlikely to benefit from the strategy. The initiative has also failed to dampen the recent fuel hikes that came into effect at the beginning of the new year. The only “success” we the ZWL fuel stations can claim is that we haven’t yet heard accusations that they are selling fuel exclusively in USD despite benefiting from the foreign currency auction.
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