PREVIEW
At the heart of ructions in the ruling party is a battle to control the country’s fuel supplies
A split at the top of the ruling party between President Emmerson Mnangagwa and his two vice-presidents – Constantino Chiwenga and Kembo Mohadi – is manifesting itself in a vicious fight for control of the country's oil sector. The President is believed to fear that Chiwenga intends to oust him from power.
The military-backed owner of Sakunda Holdings, Kudakwashe Tagwirei, is believed to have upset Mnangagwa and his allies, who are now trying to loosen his grip on the fuel supply and distribution business, which is backed by the Dutch-headquartered global commodities firm Trafigura (AC Vol 55 No 10, Trafigura takes over Sakunda).
Mnangagwa's allies are briefing that Tagwirei has 'captured' the state and its institutions, although before the current row he was considered a pillar of the regime. Without implicating the army, the former war veterans leader Christopher Mutsvangwa, a special advisor to Mnangagwa, said that Tagwirei was dividing the presidium, the ruling Zimbabwe African National Union-Patriotic Front's leadership body.
'How can a businessman have preferences in the presidium? That is trying to turn the country into a banana republic,' he told a Sunday newspaper. He claimed Tagwirei was getting preference ahead of other players in allocations of foreign currency, ranging between $80 million and $90m a month, from the Reserve Bank of Zimbabwe (RBZ).
The crusade against Tagwirei was meant 'to stop the flow of cash to the military', sources said. That involves breaking Trafigura's monopoly on the fuel pipeline running from Beira in Mozambique and disbanding the Command Agriculture programme, first bankrolled by Trafigura to the tune of $192m in 2017 (AC Vol 58 No 4, ZANU-PF digs for votes). Command Agriculture has since relied heavily on government funding, but is thought to have become a conduit for looting by senior regime figures. It is run by Tagwirei and the military.
Fuel discontent
'But the key interest is the fuel assets. Trafigura acquired these through Sakunda on acquisition of the company,' said a fuel industry source familiar with the fights. Mutsvangwa accuses Trafigura of 'using public infrastructure'. 'How can a pipeline and underground fuel reserves built by the country end up being run by a private individual? With its facilities, Zimbabwe should be a regional hub for fuel, but for 20 years it has had artificial shortages of fuel when it has the third-largest facility in the world,' he complains.
Through exclusive agreements, Trafigura controls the Feruka pipeline, which connects its important storage facilities in Beira to Harare (AC Vol 58 No 11, Inflation fears are back & Vol 58 No 13, Trafigura aims for gas prize). This has enabled the company to push its product to Malawi, Zambia and Botswana.
Zimbabwe's Competition and Tariff Commission approved Trafigura's acquisition of Sakunda Energy on condition that it allows other fuel importers to use the Feruka pipeline. However, industry players say that other companies have been put off the installation by Trafigura's 'punitive charges' and use road transport instead.
The pipeline has potential competition. South Africa's Mining Oil and Gas Services (MOGS) wants to construct a multibillion-dollar fuel pipeline from Mozambique branching into three southern African countries through Zimbabwe. This may undermine the Feruka pipeline, in which Trafigura has invested a great deal of money. As a result, the National Oil Infrastructure Company (NOIC), the state-owned firm which owns the pipeline jointly with Lonmin, formerly Lonrho plc, is trying to stand in MOGS's way.
Partly to justify its resistance to another pipeline, NOIC had already roped in Trafigura to undertake two upgrades on the old line to enable it to pump up to 16m litres of fuel per month. It had funded an upgrade four years ago when a drag-reducing agent was introduced which allows quicker movement of fuel, pumping a maximum of six million litres per day.
Eddie Cross, who is working with MOGS, said Trafigura had secured 'exclusive rights to the pipeline' by pre-paying for the facility for many years. That has excluded other players from using the pipeline, he told Africa Confidential. Cross is a former managing director of the Beira Corridor Group and an MP with the opposition Movement for Democratic Change.
Tagwirei has been 'flirting with the generals' ever since the coup that deposed former President Robert Mugabe, who was replaced by Mnangagwa in November, sources close to Tagwirei and Mnangagwa said.
Cabal fear
This has been a source of great worry for Mnangagwa and his allies, who believe a military cabal, led by Chiwenga, is plotting to oust him (AC Vol 59 No 18, The house of hunger revisited). Tagwirei, whom Mnangagwa disclosed was his cousin when he attended the funeral of Tagwirei's father, has been working closely with Chiwenga and several other army generals in recent months, sources close to the men report.
At that funeral, 'The whole army went there, the whole government was closed. I was outraged: A single person closing government business? This is a sign of inordinate power. Where does it come from? We want to know who is backing him,' Mutsvangwa told The Standard newspaper. Now, sources have told AC, Mnangagwa is concerned about a 'brewing coup' that may be supported by oil dollars. One source said Tagwirei's offices 'resembled a barracks' because of the frequent visits by top military men.
This is not surprising. Before the coup, the military 'emptied the fuel tanks' at all Sakunda-controlled depots before rolling out their armoured personnel carriers on the streets to force Mugabe from power. 'He was part of the inner circle of people who planned the coup,' a source within the army said. 'The idea was for Mnangagwa to serve one term and hand over power to Chiwenga, who would serve two terms before handing over to retired general Sibusiso Moyo [who belongs to the minority Ndebele]. That was meant to at least balance the tribal interests.'
Moyo, the Minister for Foreign Affairs, is the general who announced the November military takeover on television. Curiously, he has been unwell with a reported kidney ailment since September and has not been seen in public. Chiwenga has also been ill since November, he told mourners at his sister's funeral. He was hospitalised in South Africa last month.
Zimbabweans speculate that the two may have been poisoned by those keen to eliminate potential challengers to Mnangagwa's stay in power although such rumours always fly around during power struggles. Tagwirei's proximity to Trafigura has given him access to cash, which he has used to bail out the government as well as to make gifts to politicians and military officers.
The first sign that Mnangagwa's regime was targeting Tagwirei emerged late last month when a dismissed ZANU-PF member, William Mutumanje (also known as Acie Lumumba), who had just been appointed by new Finance Minister Mthuli Ncube to chair a communications task force, alleged that Tagwirei was a 'queen bee' fleecing the economy by dominating the fuel sector. He said Tagwirei was working with four RBZ directors who were giving him preference in allocating foreign currency, some of which was being diverted back into the directors' bank accounts.
Although RBZ Governor John Mangudya at first defended the directors, he swiftly suspended them and they are believed to be under investigation. Mutumanje's outbursts were then followed by Mutsvangwa's allegations, which critics said could not have been made without Mnangagwa's permission. 'Remember, he is Mnangagwa's advisor. He could not have spoken of Tagwirei splitting the presidium without discussing that with his principal,' a source familiar with the developments said.
During the campaign period before the 30 July elections, a grenade was thrown at the stage at White City Stadium in Bulawayo soon after a ZANU-PF rally addressed by the President. The grenade was traced to military stocks. Mnangagwa said he knew the people behind the attack, and warned he would deal with them after the election. His allies suspect it was Chiwenga, who wanted 'to remind ED about their one-term pact'. Apparently, Mnangagwa had already started talking about two terms during the campaign.
Reports of animosity between Chiwenga and Mnangagwa, called ED by many of his supporters, have been a frequent headline in local newspapers, though these have been denied by Mnangagwa. At an annual national assembly in Harare on 1 November, the ZANU-PF Youth League coined slogans heralding Mnangagwa's re-election in 2023. 'Those who were saying Mnangagwa will rule for only one term are lost,' said the Youth League's political commissar Godfrey Tsenengamu, in a clear reference to the Chiwenga faction. Chiwenga, who has been beside Mnangagwa at most of his public meetings, was not present.
'Escalation of hostilities'
Soon after, Mnangagwa, through Statutory Instrument 214 of 2018, stripped Chiwenga of all powers assigned to him for the defence and war veterans' portfolios; he had earlier been given oversight of procurement and research. One cabinet source called this 'an escalation of hostilities' between the two.
Mnangagwa is already working with Finance Minister Ncube to stem the flow of cash to the armed forces through Command Agriculture. 'Expenditure on agriculture has been one of the major components driving the budget deficit recently. Expenditure on the sector reached $1.1 billion as at August 2018, against an annual budget target of $401m,' Ncube said. But in a sign of defiance, the Air Force of Zimbabwe commander, Air Marshal Elson Moyo, said: 'We foresee Command Agriculture going on for ten years to come.' He said it had ensured food security in the country.
At least two sources within the energy sector told AC that Mnangagwa had sent his son, Emmerson Jnr, to assure Tagwirei that he was not responsible for his current woes. But Tagwirei is said to have been unconvinced.
A member of the Seventh-Day Adventist Church, Tagwirei reportedly argues that all his deals have been sanctioned by either Mnangagwa or the responsible authorities. 'He has clearly been disturbed by recent events,' said a close friend from church. 'He is a victim of renewed factional wars in ZANU-PF.'
Even as he was facing a barrage of attacks from Mnangagwa's allies, Tagwirei came up with a 1.6 billion-litre facility to ease a fuel crisis. Joram Gumbo, the Energy Minister, said the facility was negotiated 'with Sakunda and its partner Trafigura'. Even before its conclusion a fortnight ago, Trafigura released 100 million litres of fuel to the government, which immediately eased shortages in the economy. The facility will be paid for after 12 months, Gumbo said.
Debts balloon, prices skyrocket
Zimbabwe's new Minister of Finance, the primarily apolitical Mthuli Ncube, faces an enormous and contradictory challenge. He has to win foreign confidence to attract investment so as to halt the death spiral of an economy burdened by enormous overseas debt. And he must do it at the very moment factions of the ruling Zimbabwe African National Union-Patriotic Front (ZANU-PF) compete to appropriate crucial sectors of the flailing economy. So far, he has depended on promises and warm words whose effect is still under consideration.
According to a recent government of Zimbabwe strategy paper, the external debt is US$7.4 billion. Yet the more worrying figure is domestic debt, which ballooned from $275.8 million in 2012 to $9.5bn in 2018 (official government figures), through the issuing of treasury bills and central bank overdrafts. As the treasury bills were not backed by US dollars, the government has been unable to pay them back.
Leading Zimbabwean businesses are stuck because they were coerced into purchasing treasury bills which remain unpaid despite maturing as long as five years ago.
Throughout the year, the exchange rate between the electronic money in the RTGS (real-time gross settlement) system and US dollar cash has been climbing, as has the exchange rate between bond notes and US dollar cash. This generated anxiety, as RTGS payments should represent US dollars in citizens' bank accounts, and former Finance Minister Patrick Chinamasa had promised Zimbabweans that bond notes would always be exactly on a par with the US dollar in their bank accounts.
Cognisant that one of his first jobs as Finance Minister must be to stabilise the spiralling economy, Ncube ordered the banks on 1 October to separate clients' bank accounts into accounts backed by hard cash and those backed by RTGS.
Panicked Zimbabweans, believing that their savings were on the brink of losing all value, rushed to empty their accounts. Supermarkets took advantage of the all-round fear to raise prices sharply.
Ncube's other big announcement, on 1 November, was that all electronic payments would attract a 2% tax. Though increasing government revenue is a priority, this tax was wildly unpopular, as it makes already high prices unaffordable, and because Zimbabweans rely heavily on electronic payments (either mobile money or swipe) in this cash-starved economy.
Obert Mpofu, a veteran minister under Robert Mugabe who was shuffled out of cabinet along with other older factionalists to make room for the new 'technocrats' such as Ncube, took advantage of the disgruntlement to criticise the finance minister for not seeking the party's permission. Although Ncube successfully passed and implemented the bill in spite of Mpofu, this incident was a reminder of his lack of political capital, regardless of how warm an international welcome he may have had.
There is also an overall fiscal deficit of $2.3bn. This is primarily driven by 'an unbudgeted review of salaries' for the still bloated civil service which is 'projected to require around $500m', as well as $650m for 'crop input support' and $475m for grain procurement under the Command Agriculture programme (AC Vol 58 No 4, ZANU-PF digs for votes).
The government's failure to reduce the size of the civil service has been a source of contention with international financial institutions for a number of years. This cost was exacerbated by unbudgeted pre-election bonuses to ensure the loyalty of key security services. Command Agriculture is also a contentious cost, as it is a source of both income and rural control for the military, rather than an efficient means of producing food.
Ncube will need to address the fiscal deficit in the coming year, yet the most expensive sources of overspending are overtly political.
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