SANGIWEYINKOSI SIBANDA R175684D

NICOLE A NDHLOVU R174607L

KINDNESS NCUBE R174609Y

QUESTION: Case Study Paper - Parliament Visit and Report

Attend a Parliamentary sitting (National Assembly/Senate sitting, portfolio committee, public

hearing etc) and write a brief report with the following features:

a. Type of meeting
b. Agenda & participants
c. Organization of meeting
d. Summary of proceedings (2 pages)
e. Comment (attendance, level of participation or engagement, resourcing, quality of
debate/engaging, were the objectives achieved, other general comments)
f. Recommendations

Due Date: 30 April 2019

On the 7th of March, 10:00am we attended a parliamentary committee sitting on energy and
power development which was held at the parliament of Zimbabwe. The verbalized confirmation
was from the Reserve Bank Governor Dr Mangudya on the foreign currency allocation to the
fuel sector during 2018 festive season, after the announcement of new fuel price and reason for
the continued existence of fuel queues at service stations. Also another oral evidence was from
the Permanent Secretary for Finance Economic Development Mr Ngowamatanga on how excise
duty on fuel that is being implemented. The chairman Mr was directing the progress of the
committee. The other audiences encompasses representatives from various constituencies such as
Chipinge south, Masvingo, Manicaland, and Murehwa among others. There were media
representatives from herald, star FM, Voice of America among others their role was to make sure
that the information is transparency and available to the general populace.

The governor and his directors were advised by the chairman to take an oath and also permanent
secretary as soon as he came in. The chairman asserts that there was a press statement by
minister of finance were he indicated about refund system to the farmers, transporters, industry
and mining industry hence went on to ask if there a statutory instrument in place or what have
the government done so far since it was alleged that nothing of that nature happening. The other
question was directed to Dr Mangudya that how come there are some queues at service stations,
does it means that the country has no foreign currency to buy fuel, what is really happening and
how many hours are losing in queues he was asked to explain the current situation.

According to the governor, the after price increase, they noticed that fuel bill and quantity being
used was going down. He went on to say that the government were the consumer by 165 million
litters per month but due to price their anticipation was that the demand will go down to 130
million litters hence on basis of that anticipation they had been making provisions for the
importation by the oil marketing companies of 130 million litters which requires about 80 to 90
million dollars per month. The distribution schedule shows that January 2019 amount made
available through letters of credit, vent allocation, facilities came to 91, 94 million USD which
brings about 150 million litters which is more than 130 million litter hence the amount was
sufficient to the fuel needed by the economy. The fuel released into market (from the reserves
masasa to service stations) for January was 104million litters and also for February was
104million litters. Therefore the difference between 130 which they anticipated and 104 released
might be a problem in which there are fuel shortages because only 104 released out of 150litters
purchased. This was due to time lags in Letters of Credit which are used by banks to securitize
finances to fuel and other commodities which gives Zimbabwe a time span to repay in which the
day LC established is not they date they get the product. Therefore according to Dr Mangudya
not all fuel came in that month of January is now spread because there are some time lags
between establishment of LC and for the fuel company to start delivering the fuel. There is
market difference that what to you pay and what you receive mismatch but however the fuel they
purchased will come and bridge that gap in March otherwise the fuel is there in masasa and they
have to follow the process which needs the conformity of LC by advisory, supplier so as to
promote good value. The entities will be advised that LC have been conformed, and will go with
the statement for release orders. He said they may use short method through cash but establishing
LC is the best way to manage bulk things like these. The chairman therefore opened room for
questions and some of them were;

 Honourable Chombo asked that how long does the initiation of this whole process of LC
takes and Dr Mangudya answered that about 1 to 2weeks depending with the bank for
instance when establishing LC it comes with two things in which first the company applies
for n LC and they need to have credit facility put in place by the bank, it is cash covered
hence fuel company need to deposit 100 percent in their account of cash for fuel they are
going to import. Therefore sometimes the company might not have capital to establish LC
whereby using market exchange rate they should have 25 million in their account for bank to
establish LC or alternatively they need credit facility to mitigate the credit release. This will
protect the LC because when LC is maturing they should be enough money for government
to purchase foreign currency. The governor also said that after the price increase the
companies were working with the old price and with the new price they need more rtgs
dollars which they did not planned hence these also led to some lags. This also is happening
at service stations in which they also need working capital because they are run by dealers
hence they have no enough cash to purchase from supplier in time. Therefore problem is
combination of lags of LC, cash flows and facilities.
 Chairman asked issue of RTGS dollars that if this floating rate 1:2, 5 raises up to 3 does it
means also fuel price will increase. The governor answered that for now it won’t increase
 because there is a duty in the fuel price that the permanent secretary as the adviser of
government should forego part of that duty so that the price will be stable. The 2, 5 rate is not
fixed but is a starting rate hence when rates are low the RBZ will intervene in the market to
make sure price stabilise so that they can seed and when they are high will also intervene to
manage inflation so as to restore value for money
 Honourable Gambiza argues that the RBZ governor was talking about 1:2, 5 rate but on the
ground is 1:3, 6 and Eco cash is at 1:4 how do they manage all these disparities when the is
imposition of rate , isn’t it the market that determines the price rate rather than the governor
coming with the rate. The governor answered that 2,5 rate is not fixed rate they are dealing
with willing buyer willing seller rates, he went on to say these other rates may exist but street
rates does not determine market rate hence bulk products should go through formal
interbank rates.
 The other question from honourable Gambiza was that what strategies in place are or the way
forward to cover up for the cash problems and the governor answered that they requested all
companies to go into credit terms with their dealers because there are few stations owned by
the suppliers and they agreed. The strategic reserve at Masasa owned by government, can
therefore use to intervene in the market when they are fuel shortages, he said the government
is of the view that this challenge is permanent hence it requires the executive order to release
fuel from reserve.
 Honourable Muswapa asked about monitoring mechanism to monitor LC to know that what
they have been allocated is exactly what they received and the governor replied that they
monitor through ZERA inspectors. Through their supervision this is why they know about
104 litters received instead of 150little purchased and they work together to make sure that
what they pay for is what they received. Honourable Muswapa asked that is there an
incentive mechanism for banks and Dr Mangudya replied that they put safeguards between
the supplier and buyer.
 Honourable Garwe also asked that is Zimbabwe going to live in this environment because of
LC or we are going to reach an equibrium and at what stage and the governor advice
Zimbabweans to be patient, to mature and to work together as a team till an equilibrium is
reached.
Permanent secretary Mr Ngovamatanga explains the progression of the excise duty refunds in
which he states that the refund mechanism has been designed following consultations on the
subsequent industries, ZIMRA and line ministries responsible for the targeted industries as well
as treasury and are already supported by the custom and excise regulations. The implementation
of such modalities are in a manner by which tax payers operating in the identified industries will
be required to submit an application for registration as a beneficiary of fuel refund facility using
forms that have been provided to the industry. Representatives completing forms also need to
provide names under which fuel beneficiary will operate, certificate of partnerships and the name
of partnership if they have one. The approved beneficiary will submit designed application to the
commissioner. This refund is made when certain conditions are followed so it’s not automatic
refund system hence one should register, apply and then claim their refund.

 Chairman asked that who will be involved in agricultural sector since at one time communal
farmers were producing 80 percent of maize in the country and the answer from permanent
secretary was that anyone who meets the criteria which were outlined will qualify for
registration and application. Farmers, miners and everyone in the manufacturing industry
should register with their industrial bodies and all tax requirements.
 Honourable Muswapa asked that what about those who adjusted their prices and was replied
that they no longer qualify because they should not increase their prices due to bill of fuel
price and there is a penalty for supplying false information.
 Honourable Ndebele argues that these stringent requirement had already defeat 80-90 percent
of industries and went on to ask how many have been refunded so far and was replied that
they are complying with the laws to protect ultimate consumers and he said they started
receiving the applications recently.

Furthermore with the regards to questioning and answering it was open for everyone and from
above answers were impressive. Some questions were not for the permanent secretary or the
governor but was directed to the ZERA so were not answered such as that one of jatrofa project
which was suggested to mitigated diesel shortages. Public contribution were very poor since it
was an enquiry only questions were being asked and there were many questions from different
honourable and most of them were answered. The objectives of the session, one assumes that
were achieved since no question was left hanging and from one’s point of view Zimbabwe’s
situation needs a lot time there is a long way to go hence economy is deteriorating everyday and
the government needs more strategies to mitigate such problems and they need to seek advice
from outside country and from former president though he also failed the country.