The fuel matrix


UNVEILING the 2017 national Budget in Parliament on Friday, Finance minister Felix Mutati made it clear that Government was ‘‘not in the business of business’’ and announced that with effect from March 1, 2017, the Government will no longer be involved in the procurement of finished petroleum products. The private sector will from then on be responsible for the procurement, transportation, distribution and sale of this vital commodity that drives all the sectors of the economy, including Government itself. The Government however will retain its central role of regulating the industry, including setting the pump price of fuel. This drastic policy somersault caught many economic pundits by surprise and sent shock waves through Government and the private sector, as well as the economy in general. It was not immediately clear whether oil marketing companies (OMCs) – the presumed great beneficiaries of the measure – laughed or cried at the news. While the minister, when he announced this change of Government policy on the procurement of this critical commodity that breathes life into the economy, was very brief and did not elaborate what would happen next, the measure has sparked a debate that may rage on for months because it cuts down to the bone as far as the petroleum industry in Zambia is concerned. Energy Forum Zambia chairman Johnstone Bwalya is not amused. He thinks by implementing this strategy in the name of cost-cutting, the Government will be shooting itself in the foot. According to him, the Government must shelve the plan for a while as they attend to economic basics which they may not have considered in the first place. Mr Bwalya, an eloquent analyst of the energy sector and academician, is of the opinion that Government must first build up and find a means to maintain strategic fuel reserves to the tune of 90 days before it can surrender its responsibility to the private sector. ‘‘It may seem easier, especially that it was implemented at one time, but that was some decades ago when fuel demand was not high and the global economy was not fragile. Whatever has caused Government involvement to become unsustainable and inefficient may also affect private players, given that Government will still control the price,’’ he said. Has Government foreseen the likely scenario where oil marketing companies refuse to import fuel on account that the Energy Regulation Board or the Ministry of Energy has turned down their request for a pump price increase? Isn’t this measure opening Government to bribery and manipulation by a new powerful cartel in the energy sector that can hold the State to ransom? Also, like the Energy Forum Zambia  argues, this is a multi-billion dollar business which the Government is surrendering to foreign-owned powerful interests in the oil industry over which Zambians, and the Government itself, will have little say. In a free market economy, Government cannot introduce a Statutory Instrument compelling petroleum importers and distributors to keep, for example, a minimum of 15 days’ stock in their fuel tanks at any given time. What is also not clear in the Budget speech is what will happen to Tazama Pipelines, Indeni Refinery, Ndola Fuel Terminal and the bulk storage depots that Government has built in almost all the provincial centres of the country. How will these strategic oil reserve installations and companies work with private fuel importers to ensure they continue to operate at full capacity as before, maintain their workforce and still remain viable? While Government is in a hurry to decapitate the bureaucratic monster which is the cause of the subsidies currently dragging down the Government into debt, Budget deficit and spiralling operational costs, we tend to agree with the Energy Forum Zambia that it may be prudent for the Minister of Finance to stop and think. A free market economy is good for business but Government will always remain a major player in the petroleum industry, for obvious reasons. Like maize and mealie meal, fuel has the potential to bring down a government that glosses over its significance to the day-to-day well-being of its people.