Zambia’s oil dilemma

Thu, 19 Jan 2017 13:05:28 +0000

GOVERNMENT must come up with a clear, consistent and unambiguous policy to regulate the petroleum industry instead of the current flip-flop, uncoordinated way of running such a vital enterprise that makes our technocrats look like a bunch of amateurs.

Hardly three months after the Government, through the 2017 national Budget speech, stood on the pedestal of Parliament to announce that it would no longer be involved in the matrix of importing and distributing petroleum feedstock and products, we have back-pedalled and are back in it full time.

On Tuesday the State regulator Energy Regulation Board (ERB) suspended the importation of petroleum products by the oil marketing companies (OMCs), middlemen and individuals who had responded overwhelmingly to Finance Minister Felix Mutati’s assurance that the Government would keep its hands off the industry and remain only the regulator.

The Government’s lack of policy consistency is made worse by its relationship with the three foreign suppliers of feedstock being paid by Government to saturate the storage capacity of Indeni and the fuel terminal. Do we need so many importers? There was a time when Dalbit was the single supplier and we survived.

These companies supply feedstock to Indeni at a higher price than what the OMCs are able to do with petroleum products from the south. The ERB decision means the OMCs are being forced to buy the expensive fuel to keep the refinery, the fuel terminal and Tazama running.

Now the Zambian petroleum products suppliers are in serious jeopardy because many of them did not expect such a drastic measure so soon from ERB. Some of them had signed long-term agreements with financial institutions, foreign suppliers and transporters to ensure a steady supply of finished products into the country. Many of them paid for the fuel in advance, knowing they had a ready market.

Today they are in total panic as breach of contract litigations and perhaps bankruptcy stare in their faces.

Because of the Government’s decision to allow the market forces to determine the direction of the petroleum supply situation in the country, Indeni and the fuel terminal were choking because no-one was buying their products.

Indeni reportedly shut down last week because their tanks were all full and they could not refine any more. The terminal was over-flowing with finished products from Indeni and Tazama was idle because they had nowhere to deliver what they were pumping from Dar es Salaam.

They then sent an SOS to Government that either they halt the importation of petroleum products by the private sector or face a political Waterloo of the three entities shutting down in a blaze of bad publicity. Because of what insiders in the oil industry call ‘‘failure of policy’’, the Government complied and ordered the ERB on Tuesday to pull the carpet under the feet of the OMCs and other oil dealers.

This is not the way to run the economy. We urge Government to find a lasting solution to the challenges of the three State-owned enterprises in Ndola that have served the country well, despite their shortcomings, for all these years but seem to have outlived their usefulness. We have to cross the Rubicon sooner than later.

Zambia’s dilemma is what to do with them. Shut them down for good or find money to rehabilitate them in this period of scarcity and austerity when we know they are haemorrhaging the economy?

Someone has to bite the bullet. This is a moment for the strategy of courage. Maybe Government must find partners to run these companies under public private partnership and see what happens.

We must understand that the choices we make will have consequences. This is what ‘‘Restoring fiscal fitness for sustained inclusive growth and development’’ implies. As Mr Mutati put it: We cannot spend what we do not have. We cannot borrow beyond our ability to repay.