Mera puts Malawians at risk

Without money in PSF, fuel prices could rise uncontrollably
Without money in PSF, fuel prices could rise uncontrollably

Malawians are at risk of feeling the full force of changes in fuel prices after energy sector regulator Mera began drawing money from the critically important Price Stabilisation Fund (PSF).

Nation on Sunday investigations show that between January and August 2013, the Malawi Energy Regulatory Authority (Mera) has drawn about K2 billion from the PSF account at Standard Bank, Lilongwe Branch, leaving just around K8.6 million to brave a potential storm from fuel price volatility.

PSF cushions consumers and the oil industry against the impact of the rise in fuel prices on the global market and the fall in the value of the kwacha.

Draining PSF means there will be no money to lessen the impact of global fuel prices and depreciation of the unstable local currency on people’s livelihoods.

In the absence of money from PSF, volatile commodity prices and rises in the cost of living become the norm.

Mdeza: We used the money to cover loses
Mdeza: We used the money to cover loses

This is why the Consumers Association of Malawi (Cama) says it is wrong and worrisome for Mera to tamper with the price cushioning fund.

In 2012, the Joyce Banda administration reintroduced the automatic pricing mechanism (APM) for determining fuel prices.

Under APM, fuel price changes are triggered by any movement above five percent to the exchange rate, global oil prices and inbound landed costs of oil.

Mera collects the money that makes up PSF through levies imposed on motorists.

According to bank details for the Mera Stabilisation Fund account number 1811328 at Standard Bank, Lilongwe Branch, as of August 8 2013, the account had only K8.6 million balance.

However, the bank account shows that about K2.7 billion was deposited during the six months period between January 2 2013 and August 8 2013. During the period, Mera withdrew about K2 billion from the fund.

Itemised transaction records for the account indicate that about K1.9 billion was deposited by Petroleum Importers of Malawi (PIL).

About K530 million is shown as repayment of principal while roughly K275 million is captured as money from unidentified sources.

On June 25 2013, K530 million was deposited into the account before being withdrawn on June 28 2013. The same thing happened for a transaction involving K275 381 665.62, which was withdrawn on July 30 2013 and was re-deposited the same day.

Apart from bank transactions coded Sweep Debit, Credit Interest, Withholding Tax, Mini-statement Charges and Commission paid to the bank, withdrawals were made and forwarded to the National Oil Company of Malawi (Nocma).

Nocma, which should contribute to PSF instead of benefiting from the fund, especially when APM has protected it against import losses, received K170 216 829.78 from the account on July 5 2013.

Nocma general manager Robert Mdeza confirmed that his company has been receiving money from PSF, arguing that it is in line with the rules of the fund.

He said so far Nocma has received about K2 billion from the fund.

“Following the devaluation and floatation of the kwacha in May 2012, we incurred huge exchange losses relating to fuel that we imported on behalf of the country.

“The PSF was in deficit and, therefore, our compensation to cover the exchange losses had to be spread into the future.

“Apart from PSF, Mera introduced an additional line to help in paying these past exchange losses and it is from these two sources [PSF and loss recovery lines] that we have received funds through Mera to remit to suppliers for fuel that the country already consumed last year,” said Mdeza.

According to Mdeza, Nocma contributes to the fund every time it sells fuel to oil companies before asking Mera to pay the company outstanding claims arising from last year’s trade losses.

Cama executive director John Kapito yesterday said transferring money from the fund to other sectors contradicts the Mera Act.

“The Price Stabilisation Fund is meant to cushion the oil industry and consumers against the effects of price movements. Such money is meant to be restricted to such a purpose. Transferring any of such funds by Mera to any other sectors is in conflict with the Mera Act.

Kapito said the money in PSF belongs to consumers, arguing that transparency is crucial to maintain consumer confidence in the way the resources are applied.

Mera  executive director Eunice Potani refused to comment on the issue, preferring a face-to-face interview.

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  1. It’s a fact of life that fuel costs money and those with the biggest budgets will command the price. Regretably, Malawi is a small player in this field and should perhaps look at alternative solutions?

    The ‘Warm Heart’ has an abundance of free sunshine! Use it?

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