An evaluation of the effects of deregulation on the petroleum sector in Zimbabwe

Abstract

The purpose of this research paper is to examine the effects of deregulation on the petroleum sector in Zimbabwe. The sector was deregulated in order to encourage the participation of indigenous companies and to alleviate fuel supply constraints faced by industries such as manufacturing and transport. Deregulation occurred as a result of policy recommendations made by the International Monetary Fund in 1996 intended to create a more competitive environment and to reduce fiscal drain caused by fuel subsidies to the National Oil Company of Zimbabwe. The research was conducted in Zimbabwe on the nine indigenous oil companies recognised by statutory instrument No 301A/2001. The research was conducted by administering a questionnaire to respondents from the selected sample and a response rate of fifty six percent was achieved. Two companies were excluded from the research due to the loss of their licences during the year. The questionnaire consisted of both open ended and close ended questions covering issues pertaining to the regulatory environment and the strategies of the oil companies. The responses collected were summarised and tabulated. The results revealed that although the respondents acknowledged that deregulation had benefited indigenous companies, the level of environmental dynamism in the sector required urgent attention. By rationalising the number of oil companies and through the Petroleum Regulatory Authority, Government can bring order and set operational standards in the sector. The paper concluded that the competitive landscape has changed and both indigenous oil companies and multinational oil companies had the onerous task of crafting strategies that would enable them to survive the dynamic environment. Recommendations are made to Government on the need to bring order to the sector by implementing the provisions of the Petroleum Act through the Petroleum Regulatory Authority. Indigenous oil companies encouraged to create a united body to lobby for protective legislation and to develop strategies to become more competitive.