Recent militia attacks on fuel tankers in Mozambique should not only cause national anguish, but also prompt realisation of the need for long-term mechanisms to mitigate the impact of such developments the Malawi economy.
Studies have shown correlation between a country’s energy consumption levels and its economic development, with higher energy consuming nations registering higher development levels. China in the East is an example.
For a country to consume more energy, the resource should be readily available in the first place. Anything that interferes with the energy supply chain counters a country’s energy consumption level, slowing development in the process.
As of June 16 2016, over 100 000 litres of liquid fuel worth over K70 million destined for Malawi from Beira in Mozambique had been lost due to militia attacks. Despite the loss, Malawi will still have to remit forex to the supplier. This is the worrisome part.
Malawi currently gets fuel through the Beira-Malawi route by road (65 percent of the total national requirements); Dar es Salaam by road (20 percent of the total national requirements) and Nacala route by rail (15 percent of the total national requirements).
So far, there are no indications that the security breakdown in Mozambique will end soon, implying that at stake is the lifting of up to 65 percent of the fuel the country needs.
Recently reported military escorts on the Beira-Malawi route and the option of using Zimbabwe’s oil pipe-line are not sustainable as their success solely depends on unpredictable circumstances prevailing in those countries. That way, Malawi’s fuel supply remains at the mercy of circumstances that the country cannot control.
Route disruptions as is the case in Mozambique are only one reason for a breakdown in the fuel supply chain. Many others exist.
Preparing for such eventualities as a country is, therefore, not an option, but a ‘moral’ necessity. Regrettably, we cannot claim to be prepared for such with only 15 days of fuel cover, the current reality.
It is for this reason that with a loan from the Indian Government, the Malawi Government, in 2013, embarked on Strategic Fuel Reserves construction to grow the country’s fuel cover to 60 days, with the expectation that private oil marketing companies will provide a 30-day cover. This would make a total of 90 days, a recommendation by the Sothern African Development Community (Sadc).
Strategic fuel reserves constructed in Blantyre, Lilongwe and Mzuzu seek to ensure security and stability of fuel supplies. There is an urgent need not just to make the reserves operational, but also to ensure that the facilities are self sustaining to avoid burdening the public purse.
One way of achieving this is through implementing reforms Government has already approved regarding the country’s fuel importation system. A reform area in this regard is the adoption of a Bulk Procurement System—consolidating all the country’s fuel orders into one, with a single entity assuming the responsibility.
With that, Malawi takes advantage of not just economies of scale, leading to lower premiums, but also of the current 90-day credit period through which the country buys its fuel.
During the 90-day ‘grace period’, the Strategic Fuel Reserves operator will have sold enough fuel and collected enough cash to start paying for bills, thereby starting the financing capital cycle.
So far, underway are developments that, with the proposed new fuel importation system as described above in place, it can be said that Malawi is on the right path towards ensuring security and stability of fuel supplies.
As we do not have direct access to the Indian Ocean and rely on other countries’ routes, there is need for a strategy for managing the fuel storage facilities in a sustainable manner.