OIL Marketing Companies Association of Zambia president Dr Kafula Mubanga says government should not rule out private sector participation as it engages in an oil deal with Angola.
Minister of Commerce Trade and Industry Chipoka Mulenga recently shared on his Facebook page that Zambia had asked Angola to consider supplying refined fuel on a government-to-government, business-to-government, and business-to-business basis in order to have access to refined petroleum and diesel at concessional prices.
In an interview, Tuesday, Dr Kafula said although the move was welcome, it threatened private sector participation in the sector.
“I think it is basically a welcome move that government is trying to undertake. But I think it threatens the private sector participation in the sector in the sense that as you recall that the thrust of this government in the petroleum sector has been that it should be privately driven sector to avoid some of the issues that we, as a country, undergo. If you do recall that we have accumulated debt where government had almost 70 percent participation in the procuring of fuel products. Eventually, the country went into debt, now that debt trap which we went into set a precedence as how best we can run the sub sector,” he said.
“One of the things that we kept mentioning is that well the bilateral agreement between Angola and Zambia could work to an extent where there is a pipeline. Those are enabling factors that government can negotiate at bilateral levels. But in terms of government participating in procuring of this crude oil and into the finished products I think it kills the spirit of the private driven concept that government came up with.”
Dr Kafula insisted that government should not rule out private sector participation, saying doing so may cause challenges in the sector.
“So we still urge government that let them still stand with the private sector driven. In terms of its investment, it rules out risks of debt traps, it rules out a number of challenges that we had like shortages on the market of fuel and so on and so forth. So it does not actually take the country into a panic mood. If you remember what happened was that immediately you attract debt that you can’t pay, you have shortages on the market then the government goes into a panic mood where now most importers come in and you have got product dumping and so on and so forth,” he said.
“This should not repeat itself. We should have leant from the previous systems that [it] doesn’t work properly. So we still urge government to ensure that this undertaking involves the private sector, particularly the Zambian people.”
He said the government’s earlier pronouncement that it would ensure that the fuel industry was private-sector driven encouraged a lot of investment by OMCAZ.
“As OMCAZ we were excited when government mentioned explicitly that they will ensure that the fuel industry or sector is private driven. And we had seen that there is actually private investment coming through into the sector. And I think that it encouraged a lot of investment by OMCAZ. Now that in itself created some sort of a buffer for government in terms of revenue in the sense that when you have investment trickling into a sector from different angles, most of this comes in as foreign currency. And so you are able to balance your forex because you might be able to understand that one of the lucrative sub sector in this economy is fuel industry, it attracts forex so so fast,” Dr Kafula said.
“Now if you cut down participation of the private sector it entails a slowdown in terms of how much forex you are going to attract. So we hope that government would really create that MOU undertaking without leaving the private sector participation off the undertaking. We hope that government will still maintain its 40 percent participation in the sector and allow the private sector to drive the 60 percent investment to avoid debt traps that we have been into and also inefficiencies that were actually evident, that were there during the previous regime.”
Meanwhile, Dr Kafula said the agreement would help stabilise the fuel pump price as well as the economy.
“It is clear that once government undertakes that undertaking which we have been pushing for so long, we are also happy that government has heard, government has decided to explore these opportunities. We do know for the fact that product cost will come down. As we speak, the cheapest country in Africa where you can buy fuel is Angola and if we tap into that, it means that it brings your cost of fuel quite low. We should be comparing with their cost slightly in terms of the pump price. So it is a welcome move and it will definitely trigger low prices for the product and stabilisation of the economy. As we speak the economy is not very stable so we hope that that move can be done quickly and expeditiously so that we have this engagement with Angola,” said Dr Kafula.