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Govt insists on murky US$20m Petrotrade deal

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…struggling govt-entities up for grabs

GOVERNMENT is forging ahead with the disputed and controversial deal that will see one of the country’s biggest fuel suppliers, the state-owned Petrotrade, being sold to a Kuwaiti firm, the Independent Petroleum Group (IPG), for less than US$20 million, in a deal insiders say reeks with corruption.

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In March, Energy minister Soda Zhemu suspended the eight-member Petrotrade board, claiming he had instituted investigations over “corporate governance issues”, but The NewsHawks was then reliably informed that the suspensions were to facilitate the controversial deal fiercely objected by the Tinomudaishe Chinyoka-chaired board.

The board members were opposed to a suspicious deal that they said smacked of corruption in which Petrotrade and Genesis Energy are to be sold to IPG of Kuwait.

Despite the deal being mired in controversy and alleged corruption, Finance and Economic Development minister Mthuli Ncube on Thursday confirmed the deal will go ahead.

Ncube, in his mid-term budget and fiscal review statement, also mentioned several other parastatals that are targeted while giving progress on state-owned enterprises reform.

“In April 2021, a transactional adviser was engaged and has since completed the due diligence on Petrotrade and Genesis Energy companies in March 2022 that will inform the merging of the companies,” Ncube said, confirming the earlier suspicion as to why Chinyoka and his team, who were opposed to the deal, were suspended.

A local transaction advisory consortium has already been paid US$115 000 even before the controversial deal is signed.

No feedback has been given since the board’s suspension.

“The execution of the envisaged merger of Petrotrade and Genesis Energy is now awaiting necessary approvals (for the two boards of directors and the approval of line ministry level),” Ncube added.

It emerged that ministry officials were pushing for the sale of Petrotrade for less than US$20 million to IPG after an understated valuation which is said to be prejudicial to the state and set to benefit corrupt government officials.

Petrotrade (Pvt) Ltd and Genesis are two of the six major oil-importing entities, including the Indigenous Petroleum Association of Zimbabwe, Zuva Petroleum, Puma Energy (Trafigura), Total Zimbabwe and Engen Petroleum Zimbabwe, who service the cumulative daily fuel requirements of 4.1 million litres of diesel and 3.1 million litres of petrol in the local market.

The fight over the merger and ultimate sale of the two firms is now before the courts where Chinyoka is challenging his suspension.

In court papers, Chinyoka, a seasoned lawyer, accused Zhemu and senior officials in the ministry of pushing the privatisation of Petrotrade “to the exclusion of the board, which is unlawful”.

Chinyoka described the deal as riddled with corruption.

Both Petrotrade and Genesis are 100% owned by the government.

The takeover of Petrotrade, officials argued, would be dire for the country as the police, military, Zesa and other state entities currently have lines of credit from Petrotrade and Genesis, from where they also access fuel in local currency.

Other government-owned entities set for reform, Ncube said, include the struggling mobile network operator NetOne.

TelOne is also up for reforms and privatisation with discussions at an advanced stage with the International Finance Corporation (IFC), under the World Bank Group, with a view to engaging it as the transactional adviser.

“To date, the International Finance Corporation has concluded the market assessment study for the privatisation of NetOne and TelOne which will identify and describe in detail some of the critical success factors which would lead to the realisation of a successful partial-privatisation transaction,” Ncube said.

After successful de-merger from the Grain Marketing Board (GMB), Silo Foods Industries is now seeking financial injection for procurement of new plant and equipment for milling and processing, rehabilitation of existing equipment, refurbishment of factory buildings, purchase of distribution fleet.

“The re-capitalisation of Silo Foods Industries will proceed by way of equity participation by the private sector through the disposal of a 26% stake. A greater stake of the remaining 74% is earmarked for acquisition by a local government-owned strategic investor which was identified as an anchor investor given the national strategic importance of Silo Foods Industries.”

The turbaeound of the National Railways of Zimbabwe (NRZ), Ncube said, given the huge capital requirements to fully capitalise the entity, would be undertaken in two phases, namely, the Short-Term Recapitalisation Phase and the Medium to Long Term Recapitalisation Phase.

“In the Short Term, resource mobilisation strategies will target acquisition of nine new locomotives, 315 wagons and five Diesel Multiple Units (DMU) at a total cost of US$115 million.”

Other companies earmarked for reform include power utility Zesa, public transporter Zupco, and POSB.

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