Questionable oil procurement

The Government has no choice but work out a transparent and equitable oil procurement and price stabilization system.

We do not seem to have such a mechanism and the result of price shocks arising from Kwacha devaluation may have dramatic negative effect on our economy as Government, for political exigencies, attempts to shield consumers from the direct impact of higher prices.

Recourse will as usual be sought on nonexistent public funds, in the absence of a market driven price stabilization system.

Most Governments in the world do not have a direct role in oil marketing, leaving this to private companies but for some reason our Government is not only steeped in but also directly involved in oil procurement in a manner that has raised many concerns.

Private participation has been discouraged by among other things a levy of 25 percent imposed on private companies that import oil. This levy precludes private participation leaving Government and its favored importers to import at uncompetitive prices.

Price stabilization is a complex maneuver that requires the use of financial hedging instruments to mitigate the impact of oil price volatility on the cost of oil derivatives.

Similarly many countries have resorted to oil stabilization funds that are modeled from consumption patterns as determined by active private companies involved in fuel importation.

The current opaque and highly contaminated procurement system is untenable, un-economic and open to manipulation. This has immediate and long term effects on consumers who include industry, motorists and the general population which makes use of motorized transport.

It is totally unstable and ultimately untenable that two companies Dalbit, which Secretary General Wynter Kabimba accused of corruption and Trafigura which has an equally badĀ  recordĀ  should be plying hundreds of tankers to transport oil; from Dar-es- Salaam and Beira on our roads which are already in a very poor state.

The prices charged by the two companies are obviously high enough to sustain this form of fuel transportation which is not cheap but for which Zambians are paying.

That is why Zambians have very legitimate reasons, for questioning the policies that inform our current oil procurement and price stabilization mechanisms given that the process is neither transparent nor subject to business scrutiny.

We are already aware that the prices charged by Trafigura were double the world market rate; and to avoid any doubt this matter has not been closed. Those responsible will be held to account and the excess charged must be refunded to the Zambian people.

That is why it is worrying that Trafigura has not only continued to truck oil into Zambia but is also the owner of Puma Zambia a company that is involved in the retail of fuel. This means that one company imports in bulk and then distributes in retail. By all standards the competition commission should have been immediately challenged but surprisingly has not.

The fact that Indeni which has hitherto been supplying our fuel needs is reported to be obsolete only adds to the many imponderables which the country must deal with in arriving at a manageable oil import policy.

We cannot afford to subject oil to political whim otherwise the result will be catastrophic.