OIL Marketing Companies Association of Zambia (OMCAZ) president Dr Kafula Mubanga says fuel pump prices are likely to be adjusted upwards despite the government’s decision to waive the importation of finished petroleum products.
On Tuesday, government announced that it had granted OMC’s a waiver to import petroleum products for a six-month period effective January 1.
Commenting on the development, Dr Mubanga said that while government’s incentives to help secure the commodity were welcome, there was still a chance that fuel prices would increase given the huge market share multinational firms had in the fuel subsector to control the flow of supply and influence pricing.
He added that as long as there was no assurance from suppliers to flood the market with petroleum products, fuel pump prices were still likely to be hiked.
“The waivers were issued somewhere in December, last year, and we are in January. The Honourable (Energy) Minister (Mathew Nkhuwa) is just confirming the laid down strategy that government has employed in ensuring that there is adequate supply of petroleum products on the market. And not only have they given us the waivers, they have actually given us zero rating of taxes such as excise duty and so on. So, we expect that with those kind of incentives, we will see a drastic change in terms of product delivery in the country. And I still echo that there is much that needed to be done in as far as procuring these national products and supply is concerned,” Dr Mubanga said.
“The empowerment process must target indigenous Zambians to drive the industry as opposed to letting it be driven by multinationals who at any time would want to hold the products at ransom and hold it back and inform government of what’s obtaining. So, we feel that government needs to do more in terms of empowering indigenous Zambians to drive the industry. We have the capacity; we have the brains; we have the experience; we have the requisite experience to drive this industry, but what we see, today, the large market share is driven by foreign nationals, the multinationals. So, it doesn’t give a guarantee that having been given this rebate, we will ensure that products are made available. But if they do not, there is no guarantee that they will not force government to revise the prices.”
He said that government must put in place a deliberate policy to empower Zambian-owned OMCs who will not compel them to increase fuel prices.
“So, we still urge government that if this is made for Zambians, we would be able to secure a stable price for the next twelve months for and on behalf of government. It means we would make sure that the price is consistent with government policy of non-increase of pump prices. But because the multinationals hold the products at ransom, the prices might still be increased. Of course, because you see, they are profit-making organisations, they want to make profits, they want to hold government at ransom to make them desperate and then they force them to increase pump prices. Government has done its part, but have the multinationals committed to supplying that product because government will not supply the products? Is the incentive enough for them to commit that they will supply this product consistently?” wondered Dr Mubanga.
“They have not come out clearly. In the event that they don’t, what are the measures that government has put in place to make sure that the product is secured other than these incentives? So, it’s still an open-ended kind of strategy, but we need to close it by making commitments. Getting commitment from various stakeholders that are major controllers of the market share. That is how we look at it. It does not enforce commitment by the multinationals, who are in the majority in supplying this product.”
Apart from zero rating of VAT on fuel, government had also removed excise duty on the commodity to ensure it cushioned the cost burden incurred by OMCs in the procurement of fuel on the international market.
Fuel pump prices were last adjusted in December, 2019, which saw petrol prices hiked to an unprecedented to K17.62 per litre from K15.98 when the kwacha was at K14 per dollar and Crude oil prices peaked at US $70 per barrel.
But fuel prices remained unchanged despite the local unit having depreciated to its worst ever trading position to sink to K21.50 per dollar last year as Brent Crude oil prices remained elevated at over US $55 per barrel.