Zambia relaxes fuel import measures as shortages ease

Lusaka – Oil Marketing Companies (OMCs) in Zambia were this week issued with a statutory instrument allowing them to import fuel without paying duty. The move was meant to avert erratic fuel supply the country was currently facing. Although the two-week long fuel shortage which saw some motorists spending nights at service stations seemed to have normalised, reports indicated that some parts of Zambia were without the commodity.
 In a statutory instrument distributed by the Zambia Revenue Authority (ZRA), Finance and national planning minister Situmbeko Musokotwane said until November 30, 2009, OMC’s would no longer pay the 25 percent duty imposed on diesel and gasoline imports. “The OMC’s would be allowed to import as much as 21 million litres of diesel and almost 11 million litres of gasoline.
OMC’s would not be allowed to increase prices until the statutory instrument which had been backdated to October 21, 2009, expires.” According to government, the fuel shortage was caused by catalyst breakdown at the country’s only oil refinery company, Indeni, which forced the plant to shut down earlier than expected even though it was due for servicing.
But economists have said scrapping off duty was not a long-term solution to the problem of fuel shortages which occurs almost on an annual basis. In an interview Charles Milupi said to avoid another crisis, government needed to revise its oil procurement system. He said the country needed to completely overhaul the procurement process. “Zambians should brace for more fuel shortages because the current resumption of normal fuel supplies is temporal.
The major problem is the procurement of oil. We as a country have decided that the selected, the favoured few, are the ones to be involved in the procurement of oil and it is at procurement process that needs to be completely overhauled,” he said “Fuel is one of those commodities that sells itself. You bring in fuel, put in your mark up, you sell it and there is no shortage of money pages because all the fuel that comes in is bought. So why do we have problems. And despite worries expressed by various stakeholders, the Zambian government has defended its decision to buy 50 percent of French Oil giant Total El Fina EIF shares in Indeni Petroleum Refinery.
Energy minister, Kenneth Konga told Southern Times that the refinery was of strategic importance to Zambia’s economy, “Government has considered all the options and decided that it would be in the best interest of the country for government to acquire Totals shares in Indeni Talks with Total to acquire full control of the plant have reached an advanced stage and will be concluded soon.” Total acquired a 50 percent stake in Indeni in 2001 from Italy based-Agip and assumed the supply of crude oil feedstock to Indeni in 2002 following the liquidation of the Zambia Oil company but stopped in 2007 after disagreements with the Zambian government.
Since then, the government has been procuring feedstocks for the refinery but delays in deliveries have caused erratic fuel supply in the country in recent years. But the Engineering Institute of Zambia (EIZ) have warned of a serious fuel crisis once government takes over 100 percent control of Indeni. “Most parastatals in the country are currently grossly inefficient. Where is the government going to get the money to recapitalise Indeni when most parastatals are acutely undercapitalised,” noted EIZ president Henry Musonda. Recent projections indicate that Indeni Petroleum Refinery requires close to US$65 million for recapitalisation.
 

October 2009
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