Fuel crisis looming as govt fails to pay suppliers $500 m

Fuel crisis looming as govt fails to pay suppliers $500 m

*** For close to four years now, government has stopped calling for bids to supply fuel in preference for short term, back door arrangements.

Major fuel suppliers to Zambia have either ceased or reduced the amount they supply due to government’s failure to pay for the fuel, the Watchdog has been informed.

According to government sources, the government owes fuel suppliers in excess of $500 million and has been failing to pay for the past four years. Fuel suppliers have been delivering on credit. But now suppliers have decided to stop supplying until they are paid.

‘Some stopped supplying while those that are being paid something towards the outstanding bills which are around $500m have reduced their supplies,’ a government official explained.

To avert a looming shortage on the market, the government has allowed a number of Oil MarketingCompanies (OMCs) to import their own fuel to meet their client requirements.

Indeni Refinery only meets 50% of the national demand while the balance is imported as finished products.

As a result of this, the country has 3 days stock instead of the desired 15 days, a senior government official complained.

Indeni plans to shut down for maintenance on 1 April for 35 days. This will mean more direct imports according to quarters given by the Ministry.

The bulk of the imports have been given to Puma, Total, Oryx, Mt. Meru. Smaller quantities given to Dalbit, Spectra and others, the Watchdog is reliably informed.

Zambia imports all of its petroleum requirements, mainly from the Middle East, through the port of Dar-es-Salaam in Tanzania.

The ideal situation, and what has been the practice is that government contracts one or two big fuel suppliers to supply the country with the required amount of fuel for a year or two.

But the last time government entered into such a contract was in 2016. Since then, government has not advertised any public bids For the supply of fuel. Since 2016, government has been procuring fuel through the back door, individuals arrangements which is laden with corruption.

The last bid for supply of fuel was in 2016 when the Ministry of Energy and Water Development sought suppliers of 520,000m3 of Diesel and 264,000m3 of Petrol in Lot 1 that was to be conducted through International Competitive bidding while Lot 2 that requires 130,000m3 of Diesel and 66,000m3 of Petrol through Open National Building procedures.

Some of the biggest corruption cases in Zambia occur in the procurement of oil.

For example, a commission of inquiry set up by Government estimated that Zambia had lost in excess of (
US$445m between 2007 and 2011 owing to kickbacks and poorly negotiated oil-procurement deals. In a similar vein, a report published by the World Bank in January 2010 estimated that Zambia had lost US$93m in 2008 and 2009 because the government had paid more than the reference (spot) price for its oil imports. A related paper published by the Zambia Institute for Policy Analysis and Research (ZIPAR) calculated that this lost amount was equivalent to 12.5% of Zambia’s total expenditure on crude oil imports.

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