It’s chaos out there – but we have plenty of fuel

9 01 2019

One of the less congested fuel queues around town

I passed W coming out of the gym this lunchtime just as I arrived. We exchanged the usual pleasantries. I know he works for a fuel distribution company so couldn’t resist asking how business was going, given the chaotic fuel queues around town.

“Oh it’s madness” he replied, shaking his head and laughing at the craziness of it all. “I couldn’t even get past the fuel queue at the intersection of The Chase and Golden Stairs road. Some truck had managed to totally block the road”.

I felt relieved that I’d taken a different route and made a mental note to go back the way I’d come, the road was appalling but free of congestion. “But what’s causing the chaos, the usual lack of money?” I asked.

“Of course. The government is utterly broke. They are insisting that the bond, RTGS or whatever you want to call the local money is equal to 1 US dollar when we all know it’s not.”

“So is there really a fuel shortage?” I asked.

“Oh hell no” and he laughed ironically. “You know all those fuel depots around town?” and he mentioned several though I only knew of the one on the Mutare road to the east. “They are all full, right to the brim. The fuel all belongs to private importers and they are ONLY accepting hard currency”.

“So if someone comes to you with real money you can sell them fuel?”

“Oh yes” W replied. “We are doing quite a lot of business with people who have Nostro accounts (foreign currency accounts holding export earnings). I am sure we can help you out. We can bypass all the nonsense. I must dash, see you around” and he was gone.

I wasn’t actually asking to buy any fuel – I don’t at the moment have anywhere to store fuel as I bought a couple of thousand litres in February last year when we had a similar panic. It didn’t last long but I am glad now that I bought it. Anyway, I’d found out what I needed to know – namely that the government was only half telling the truth when they claim that we have plenty of fuel in the country. We do, they just cannot afford to buy it. The solution has to be a return to the US dollar as the official currency but that is not going to happen anytime soon. There are not enough of them to support the economy. The government would have to admit the local currency is not on parity with the US dollar (current street rates are about 3.7:1 which makes our fuel very cheap indeed) and work out how to demonetize the local money. It’s not going to happen soon and like a customer said to me yesterday – “the future looks bleak and there is no rabbit in a hat to pull out this time. It’s going to be a tough year ahead.”

 





The Zim dollar is back (déjà-vu again)

7 10 2018

Who wants to look at picture of cars queuing at a fuel station?

“The bottom borehole is not working” is not the most encouraging announcement I want to hear on a Monday. The borehole in question is some 500m from my office and has  been a headache ever since I started my business. Originally it used a 3 phase motor which are more efficient than single phase motors but I got so fed up with the transformer dropping a phase to a low voltage that I swapped it out for a single phase motor. This means that if a phase goes low I can switch all critical motors onto a good phase relatively quickly with some simple wiring changes on the distribution box by my office (farming in Zimbabwe requires a good deal of DIY expertise). The cable to the borehole is not really large enough for the distance so if the supply voltage drops it can spell disaster for the motor. A quick test ascertained that the motor was drawing far too much current and probably was burnt out. We got it out the hole and I took it off to the supplier along with the warranty card that showed the it was to expire by the end of the week. I was advised that if I wanted a quick response to whether the motor would be replaced under warranty I should take it to the workshop in the industrial sites. Yes, they still had that model in stock and it was $380. The workshop people in town said they’d get back to me soon. On Tuesday there was a surprise announcement from the new finance minister, Mthuli Ncube, that bank accounts would be split into FCA (foreign currency accounts) i.e. real US dollar accounts earned from exports, and local money accounts. This is a tacit admission that the local money accounts are not in fact the same as US dollars even though they are listed as such. The local money immediately lost 10% on the unofficial market – the rate is now around 2.2 local dollars to US$1. Ncube also announced a new transfer tax on all electronic transfers of 2% starting at $2 to replace the old flat rate of 5c. Given that some 96% of all money transactions in Zimbabwe are electronic it is estimated that this will bring in some $4bn extra per year. This has already changed as of the time of writing with a lower limit of $10 being imposed. He also fired the entire board of ZIMRA, the local tax authority. There was no mention of how the government was going to reduce the budget deficit. By Wednesday we were running low on water at the nursery so I had to go and buy another motor for the borehole pump as I still hadn’t heard from the workshop. It cost me $430, up $50 from Monday. I decided I had to raise my prices at the nursery by 50% – still short of the estimated exchange rate but better than we had been. I have a lot of competition so I’ve been wary of hiking prices to realistic levels up until now. Other businesses around town have been less circumspect to the point of profiteering. Marianne went to buy some pharmaceuticals this week and they’d gone up 40% – US dollars cash! I priced a cordless drill at a local hardware outlet that had increased from $380 to $1030 in about a year. Some shops are no longer displaying prices on the shelves – you have to ask at the checkout or consult and easily changed list on the end of the shelf. Bread is now short and so is fuel. Pharmaceutical companies have stopped trading due to shortages of raw materials. Queues at fuel stations are blocking traffic. Apparently international trucking companies are taking advantage of the disparity between US dollars and local money by sending their trucks through Zimbabwe with just enough fuel to get into the country, buying local money with US dollars at 2:1 and then buying fuel with the local money. Do it this way and diesel costs about US65c per litre – way below what it costs to import. On Friday I got a call from the workshop – the motor had burnt out likely due to low voltage. Did I have one of their voltage protection units on the borehole? No I didn’t. Then the warranty was invalid. I was not surprised – like all forms of insurance they will look at ways to get out of paying. I have since put a 3rd party protection unit on the switch box – hopefully it will work. My seed supplier is not returning my calls. His secretary tells me he is trying to decide whether to charge US dollars cash for the seed or hike the local price. The former will be a disaster for my business which is already in the doldrums. We have a lot of gum tree seedlings for a local company charged with reforesting farmlands that have been denuded by farmers cutting timber for curing tobacco but we negotiated the contract in April. By the time we get paid in November and December the payment is going to be very small indeed. The future is not looking bright.

A very miniature mantis

                    And the roses at the top of the post? Like I said, it beats looking at pictures of a fuel queue. There is a neighbouring nursery next to mine that specialises in roses and over the weekend they had their annual charity open day. The roses were stunning – worthy of a diversion. The mantis? Well, it just called by this afternoon at tea time. The comparison with the hyper inflation of 2008 is obvious but this time the collapse has been much faster. It’s Tuesday now and over the weekend cooking oil (much used by Zimbabweans) prices have doubled and in some areas tripled. The public transport system is unreliable as many of the mini buses that ply the trade are in fuel queues. A friend who supplies agricultural chemicals has asked me if I want to trade diesel for chemicals I need. Yup, déjà-vu indeed.