BY FIDELITY MHLANGA
The Zimbabwe Energy Regulatory Authority (Zera) has buckled under pressure from indigenous petroleum companies and withdrawn an earlier announcement of a hike in fuel procurement licences by 8 600%.
After a two-month wait, Zera announced last week that fuel licences for 2020 were now $2 million per annum and further put a $30 million performance bond as a licensing requirement.
This did not go well with a grouping of local fuel companies known as Indigenous Petroleum Association of Zimbabwe (Ipaz), who last week filed an urgent chamber application challenging Zera’s announcements.
Following the court challenge, Zera made a summersault, saying it had considered views made by energy stakeholders.
This is notwithstanding the fact that Zera had been delaying to announce the 2020 licence fees following their expiry on December 31, 2019, arguing that it was undertaking wide consultations with key stakeholders.
“Following submissions from stakeholders in the petroleum sector , on the notice referred to above, Zera hereby makes the following statements, Section B of the said Notice which refers to procurement licenses is hereby withdrawn to allow Zera to fully consider the representations made by petroleum sector stakeholders. Revised procurement licence conditions will be published in due course,” part of a Zera circular dated March 13 read.
Earlier through its lawyers Atherstone and Cook, Ipaz had dragged Zera (first respondent) and the Energy ministry (second respondent) to court challenging the new licencing regime.
Ipaz also pointed out that Zera’s board was improperly constituted, as such its decisions must be declared null and void.
“Take notice that the applicant(Ipaz) in this matter applies for an order in terms of the draft attached on the grounds that the 1st respondent issued a notice in respect of the petroleum sector on March 9, 2020. The notice is grossly unreasonable, unconstitutional and, therefore, unlawful. Put bluntly the applicant’s members are staring in the face of unlawful closure of their business as they will not be able to meet the stringent operating and licensing requirements by Zera,”Ipaz said in its application.
Ipaz in its application said there was no justification given by Zera on the unprecedented hike of procurement licence by 8 600%, adding the fees had no relationship with the size and volumes of the entity applying for the license.
“While the fee may not be a burden for large players in the industry, it is steep and burdensome for applicant’s members and will remain a pie in the sky for them, thereby effectively elbowing them out of business,” said Ipaz.
Ipaz pointed out that the requirement of having 25 sites and to prove ownership of the sites in order to qualify for a license was a new requirement adding that this requirement will automatically disqualify Ipaz members as only non Ipaz members would be able to meet the criteria.
“There was no prior warning of the imposition of such a requirement and yet Zera expects the requirement to be met by the end of March 2020, which period is grossly unreasonable,”Ipaz noted.
On the requirement for a performance of $30 million Ipaz said the amount is reasonably high and geared towards prejudicing the 77 Ipaz members.
“With the imposition of the new requirements, all 77 of our members will not be eligible to hold licenses and only 6 companies in the whole industry would qualify to do so. There was an indication that the fee would be $306 000 which some of our members have already paid in full,” said Ipaz.
In their founding affidavit, Ipaz lawyers said Zera’s new licence regime would push most players out of business given that the compliance period of March 31 2020 was too short.
“From the 31st of March 2020, whoever has not been issued with a valid license as prescribed in the notice will not be able to conduct business. I agree with the Applicant’s contention that its members will close shop from the 1st of April 2020 if the court does not afford such applicant an urgent hearing and the attendant grant of interim relief,” said the law firm.
Furthermore, the law firm said the closure of business will result in retrenchments adding that Zera’s action has deleterious effects on the economy and threat economic interests.
According to the lawyers, Ipaz members own and lease and supply 260 service stations nationwide with combined tank minimum capacity of 12 million, 8 million, 1,4 million of diesel, petrol and paraffin, respectively.
Meanwhile, last Friday government reduced fuel import duty by 50% (diesel) and 44% (petrol) imported by free funds through Statutory Instrument 64 of 2020.
Duty for petrol is now US$0,25 per litre from US$0,44 per litre while diesel will be levied US$0,20 per lire down from US$0,40.