THE REASON THE PRICE OF FUEL IS SO HIGH IN ZAMBIA.
Do you know why Indeni was built? Do you know why the Kaunda government invested hefty amounts of Copper Kwachas to build the Tazama pipeline? The reason was to kill two birds with one stone by reducing the cost of bringing fuel into Zambia.
The Tazama pipeline was a joint venture between the governments of Zambia and Tanzania. TAZAMA stands for Zambia Tanzania Mafuta. Mafuta being the native nomenclature for crude (or all things petroleum). This was a necessary cost as it was aimed at reducing the cost burden on the end user over time. And it worked!
The Indeni refinery in my hometown, Ndola was where this pipeline deposited its crude. A 1,700km journey from offshore reservoirs via Dar-es-salaam. Tanzania. So why was this such a good idea?
For starters Zambia didn’t need to pay more than was necessary to pump crude into the country. It didn’t need to pay any special taxes because it bought raw unprocessed oil. The genius behind it was that Zambia could actually focus on other pertinent issues as the problem of importing fuel no longer existed after 1968. It was to say the least genius.
So what went wrong? The refinery started aging and was neglected for some time. The old slave mill was grinding slow but it was still grinding. By the year 2000 capacity of the pipeline had nearly halved. From over one million tonnes of crude per year on Inception to just over 600,000tonnes in the year 2002.
With the continuous neglect the refinery finally gave in. You might think a country with sensible people handling these operations could have prioritised this cardinal source of everyday living. But why didn’t they?
Every crisis has winners and losers. In this case a loophole was detected where politicians and their minions’ created a very lucrative system where they profited abnormally by importing refined fuel. The whole system basically works like this:
-A middleman sources finished fuel from abroad
-The middleman negotiates where he gets a huge chunk of the cost of the fuel as a commission. These commissions according to international business practices should NOT exceed 3% of total value of goods. And this is where it gets interesting.
-The middleman haggles with the oil producer and pegs a price for fuel to be bought by local OMCs (Oil marketing companies)
-These middlemen negotiate very high commissions leaving OMCs with very little margins to work with in terms of profits. So the OMCs up their prices to make business sense.
-For the middleman it’s a Jackpot. Easy money. And lots of it.
So how does this system manage to thrive? It’s simple. The middlemen are political affiliates. The politicians peg the price of the fuel. The energy regulators can’t do much about it either becuse the middleman is protected by the politicians and the only instrument of power the regulators had is no longer productive.
This shoddy fuel trade has made many politicians and cadres extremely wealthy over a very short period of time. What’s sad is that the business is totally legal but at what cost? It is immoral, yes. It is unethical, yes.
Next time you go fill up your tank remember that you are paying a middleman up to K5 for negotiating a deal for every litre. Way above the recommended 3%. Because our shield from exploitation – the Indeni Refinery isn’t profitable to the politician. Therefore it can die. They simply don’t care.
Vote for a government that wants us all to improve. Vote for Indeni to come back to life.
By MPHO STEPHANO SIAME