Zimbabwe Review

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Posts Tagged ‘trade’

Yet another claimed oil deal for thirsty Zimbabwe

Posted by CM on December 17, 2007

We have had our hopes stirred by so many of these claimed oil deals over the past eight years of fuel shortages. None of them ever amounted to anything.

Here’s the latest one, in The Herald of December 17:

Zim strikes oil deal

ZIMBABWE has struck a deal with Equatorial Guinea in which the petroleum-rich West African country will supply crude oil, a Government official has said

“Following our engagement with Equatorial Guinea . . . Zimbabwe can now even get crude oil and arrange for its refinement through third parties,” said Industry and International Trade Minister Mr Obert Mpofu in his information memorandum to the Cabinet on his trade and investment mission to Angola recently.

The Government and Iran have already agreed to work on the refurbishment of the oil refinery here whose equipment has become obsolete. The refinery was built in the 1960s using Iranian technology and an agreement was sealed during former president Mohammad Khatami’s last visit to Zimbabwe.

Mr Mpofu said the Government was working on arrangements of paying for crude oil imports from Angola. Angola has been concerned with Zimbabwe’s payment terms. However, following consultation with stakeholders by the Ministry of Energy and Power Development, indications were made to the Angolan Ministry of Petroleum that Zimbabwe is comfortable with a 90-day credit facility. Alternatively, Zimbabwe could also repay with a refined product. In that respect, Zimbabwe would send a team to Angola to pursue the matter at a technical level.

Zimbabwe has been facing acute fuel shortages over the past seven years, a development that has affected key sectors of the economy such as tourism, manufacturing and mining. This has prompted the Government to look for alternative ways of producing fuel, including extracting bio-diesel from jatropha seeds and vegetables.

President Mugabe last month commissioned a multi-billion-dollar bio-diesel plant capable of producing at least 100 million litres of diesel per year, saving the country at least US$80 million annually.The plant is of its first kind in Africa. Plans are underway to set up such plants in all provinces.

There are also moves to revive the ethanol plant in Triangle.

As a Reuters report on the Herald story points out,

Zimbabwe agreed in 2005 with Iran to revive an oil refinery built using Iranian technology in the 1960s. Work at the refinery has not started to date.

This is not the first purported oil deal with Equitorial Guinea. None of the others came to fruition. What is different this time?

And it sounds very convoluted. The connection between oil from Eq. Guinea and payment needing to be made to the Angolans is far from clear to me!

Zimbabwe might very well be “comfortable with a 90 day credit facility,” but it is doubtful that anyone else who knows the problems the country has been experiencing all these years would be. The crazy idea to pay back the Angolans for their crude oil with refined fuel sounds like yet another of the many hare-brained schemes Zimbabwe’s desperate straits have forced the country’s rulers to conjure up over the years.

What would be in it for the Angolans? Flush with oil cash as they are, they could/should simply build up their own refining capacity. With their cash reserves, I can’t believe that would be so much more difficult than having to depend on the revival of a forty-something years old refinery in another country. The mess, logistics and expence of shipping crude one way and refined product the same way back to the original source would be silly. I cannot believe this is an option that would be seriously considered by the Angolans.

Apart from the implausibility of the story, the need for “reviving” both the Iranian built refinery and the sugar cane-based ethanol plant in Triangle is telling: They should never have been allowed to go to seed in the first place! Why were they? Is the money for the big capital expenditure required to refurbish them available, when the country cannot even import enough maize maize seed for the current farming season?

If the oil refinery was revived, how would the country afford to import the crude oil it has been failing to do in sufficient quantity for close to ten years now? Forget about private investors doing it: they would insist on charging fuel prices that made it possible to recoup their investment in re-starting the refinery, and we have seen over the years that this simple concept is not acceptable to the Zimbabwean government.

As for the Triangle plant, where is the feedstock going to come from when a lot of the area’s sugar cane production has plunged over the years, creating shortages of sugar on the market? Price controls have also been a concern, with producers being forced to sell sugar at prices below the cost of production, with predictable results-shortages on the local open market, a thriving black market and a preference for exports over supplying the domestic market. With none of these issues having been resolved for sugar, how would ethanol production be different?

As for the “100 million litres of biodiesel a year” from the new plant, I will believe that when I see the first drop. I have previously dealt with the reasons for my doubts about the workability of this otherwise good idea at this messy time in Zimbabwe.

Sadly, this latest Herald story is how the country has been strung along for eight years now. No one takes these stories of new breakthroughs too seriously anymore, and with good reason. They are too full of holes.

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Africa-Europe EPA discussion bypasses Zimbabwe

Posted by CM on December 12, 2007

The controversial Economic Partnership Agreements that are being negotiated and signed between the European Union and various regional groupings in Africa will likely fundamentally change relations between the two continents if they are implemented. A lot of the controversy around the negotiations is because the two sides have very different ideas on whether the EPAs are a good thing or not.

The EU insists it wants them signed by December 31 because that is the World Trade Organization’s deadline for the EU to liberalise trade with its former colonies in the ACP countries. The WTO ruled in 2002 that the preferential trade terms (low or no tariffs on exports to the EU) Europe gave to those ACP countries was unfair to other developing countries trying to export their goods without such generous terms. It gave the EU until the end of this year to negotiate new trade terms with former colonies.

The African countries are all worried that the concessions the EU is asking of them to continue to have relatively low tariff access to EU markets would cripple them. A major one is reciprocal low-tariff access of EU goods to African economies. The African countries are understandably worried that this could wipe out whatever industries they have, as they would not be able to compete against Europe’s more sophisticated production processes.

These are boring issues for the average person anywhere, but no one in Africa will be unaffected by what eventually is agreed upon. The EU remains by far the most important export market for Africa’s goods, which are mostly raw agricultural commodities.

Zimbabwe as one of Africa’s more “developed” economies should have been at the forefront of stating Africa’s position on the EPAs. There are many solid arguments in favour of Africa fundamentally changing its trade terms with Europe, but there also many reasons to question whether the EPAs proposed by the EU are the best way to do so.

The arguments for and against the EPAs would not be substantially different in Zimbabwe from those in, say, Kenya. That country’s press has done a decent job of laying out all the issues at stake in the negotiations. But because of Zimbabwe’s crippled economic state, the repercussions of the EPA may be even more dire for the country than for many others.

Zimbabwe has joined the list of reluctant African signers. The prohibitively raised tariffs the EU was threatening to charge goods entering its market from January 01, 2008 would so cripple African export competitiveness that there really was never any doubt that most countries would sign. This was especially true of those like Kenya and Zimbabwe that are considered “middle class” enough to not qualify for other concessionary trade term schemes with the EU.

My main point in this connection is how the immediate political mess in Zimbabwe and its effects have so consumed our attentions that we have little time and energy left to focus on other things that will determine our future as much as the current political maneuvering.

One of the few articles dealing with EPAs from a Zimbabwean perspective is

EPAs Bringing in Old Issues Through Back Door.

It sets out the general fears common to all African countries about the new trade regime that the EPAs are ushering in.

Excerpts:

 

With an economy tottering on the brink of collapse and an unenviable political situation, civil society organisations in Zimbabwe have every reason to worry about the implications of the interim agreement on trade in goods that their country has just signed as part of the economic partnership agreement (EPA) with the European Union (EU).

Andrew Mushita, director of the Community Technology Development Trust (CTDT), a non-governmental organisation with interests in trade and technology issues, says that Zimbabwe “cannot compete with the EU on an equal footing because of our economic situation.” He is also worried about the rearrangement of regional configurations as that weakened the position of African countries further.

Other organisations have also added their voices, saying that the EU will emerge as the biggest winner. It will be folly for countries like Zimbabwe with an economy in tatters to hope for any “heavenly manna” to arrive via the EPAs.

“Zimbabwe is just like any other country in the Southern African Development Community (SADC) or in East and Southern Africa (ESA) grouping. It is not ready to sign an EPA. Opening up our markets in the present state will only lead to the further exploitation of our raw materials,” said Joy Mabenge, executive director of the Zimbabwe Coalition on Debt and Development.

Mabenge says Zimbabwe needs more time to resolve its economic problems before it can make commitments like the EPAs. The EU is only interested in African raw materials, which it will return to Africa in the form of processed products at exorbitant prices. Africa still has to strengthen its economies and industrial bases.

“Let’s get our economies to function. Then we will be able to compete on an equal footing with Europe. This issue is being looked at from a simplistic point of view,” Mabenge argues.

Several Zimbabwean analysts say the current economic problems will further hinder Zimbabweans from benefiting from the EPA. Several Zimbabwean companies face demise due to government’s populist policies, which have led to shortages in foreign currency to procure essential industrial components. Zimbabwe’s inflation rate is 7,800 percent.

These problems, analysts say, make it impossible for Zimbabwean companies to compete in the EU market. A sector such as agriculture, which has witnessed a rapid dip in fortunes since 2000 after the introduction of the government’s “land reform” programme, will be forced to compete with subsidised produce from Europe.

Similarly, the beleaguered manufacturing sector will have to take on an influx of European commodities.

The Zimbabwean parliament was recently told at a caucus meeting that the EPAs will take away some of the country’s guaranteed markets.

One organisation has adopted a different position on the EPAs. The Trade and Development Studies Centre based in the Zimbabwean capital Harare does policy research and analysis, focusing particularly on the relationship between trade and development, aid and development, poverty alleviation and welfare.

“These EPAs are not coming from nowhere. They are the result of a gradual build-up through several conventions. There is nothing wrong with the EPA. The problem is its implementation. It can be developmental or have the opposite effect,”  said Masiiwa Rusare, the director of the Trade and Development Studies Centre.

“We should keep an eye on what happens. What is needed is to encourage the government to diversify its trade partners and create more options.” But Rusare concedes that regarding market accessibility and agriculture, ensuring that the EPA deal works fairly will be a Herculean task.

“It’s like taking a non-boxer into the ring with (boxing champion) Mike Tyson. The results are obvious,” Masiiwa says.

I thought the article could have gone much deeper to examine those issues from the detailed particular perspective of a Zimbabwe which is on its knees economically. But then again, it would not have been realistic for one article to go into all the intricacies of the EPAs. Other countries have had the benefit of the EPAs being discussed in the media, at conferences and so forth over several months, so that an interested citizen did have access to information on the issues and implications. Zimbabwe has suffered not only from the politics-preoccupation and the struggles of daily survival, but also from having a severely limited press.

This is just another sad indication of how Zimbabwe continues to marginalise itself from significant world affairs. These are the kinds of issues that the president of a country should be engaged with, not basking in how he was mobbed by the media at the recent Africa-Europe Lisbon summit for his notoriety!

 

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