Fuel shortage stifles business

Recurring fuel shortages have crippled businesses and forced some of them to scale down production while spending beyond budget in search for the commodity.

Industry captains told The Nation in separate interviews yesterday that the development, which comes amid prolonged electricity rationing schedules that have also escalated their production costs, will force some employers to lay off workers as business will be operating below capacity.

Meanwhile, Malawi Congress of Trade Unions (MCTU says 30 percent of  its members have reported losing jobs.

Malawi Confederation of Chambers of Commerce and Industry (MCCCI) president Lekani Katandula said the fuel shortages are a disaster for businesses and the economy in general, especially if the problem is prolonged.

He said businesses are spending about K260 million per day to run power generators, as such, any disruptions in fuel supply, especially diesel, will have a further impact on production.

Katandula, who is Illovo Sugar (Malawi) plc managing director, said: “Those that were reliant on diesel or petrol for alternative power in absence of electricity power will take further losses from lost production capacity.

“This will be exacerbated by inability to move raw materials or finished goods on top of challenges for some members of staff to commute from home to workplace and back.”

He said the industry can only hope that the government will have the International Monetary Fund (IMF) Extended Credit Facility programme deal “agreed as soon as possible” to address the forex shortages causing fuel shortages.

Players in the construction industry also said yesterday the persistent fuel shortages could hinder construction projects as most of them depend on fuel to transport construction materials and run equipment.

National Construction Industry Council corporate affairs officer Lyford Gideon said should the crisis persist, projects will face cost overruns and time.

He said: “The construction operations greatly depend on fuel, more especially diesel, since our operations are undertaken in areas where services such as electricity and water are not provided.

“With this in mind, scarcity of fuel will affect operations in the industry by slowing down progress on site. Since diesel is scarce this forces the contractors to get expensive fuel which in turn will increase costs of construction.”

According to Gideon, the shortage could further affect the quality of the infrastructure in the sense that contractors will provide compromised quality to ensure that works continue while they realise a profit.

Road Transport Operators Association executive director Chrissy Flao said they have not been spared the crisis as some trucks are already stuck on the road, therefore, affecting services delivery.

She said: “As we speak, a number of trucks are yet to deliver various goods to our customers due to the fuel supply shortages. Such a development is worrisome as it deters our mandate and affects consumers in the end who we work for.”

Meanwhile, Employers Consultative Association of Malawi executive director George Khaki warned that companies will have no choice, but to scale down and cut jobs.

He said: “In fact, some companies have scaled down operations because they are not being supplied with diesel for generators and they can hardly find it on the market. This means lowering down production translating to low revenues.

“This is coming at a time when employers are affected by rising inflation and foreign exchange shortages that have heavily impacted on utilisation of production capacities.

“Obviously, this will result in job losses due to reduced demand for goods and services and reduced revenues that companies are generating.”

Without giving exact figures, MCTU president Charles Kumchenga said yesterday that a number of their members have lost jobs as industries are scaling down due to decline in production.

He said since the start of this year roughly 30 percent of their members have reported job losses as employers have scaled down their capacity.

Meanwhile, in the midst of the crisis, some motorists were forced to buy fuel from vendors at between K3 000 and K4 500 per litre. The recommended retail price for petrol is K 1 946 per litre and diesel K1 920.

In a brief response yesterday, Malawi Energy Regulatory Authority consumer affairs and public relations manager Fitina Khonje admitted the erratic fuel supply, but highlighted that stakeholders continue “to work tirelessly to minimise the fuel supply disruptions”.

As we went to press, it was not clear how much fuel the country has in its reserves.

The fuel reserves are located in Lilongwe, Blantyre and Mzuzu with a combined storage capacity of 60 million litres, estimated to represent two months or 60 days cover at the prevalent projected daily consumption levels.

Blantyre and Lilongwe reserves have a capacity of 25 million litres each while Mzuzu reserves hold 10 million litres.

Malawi experienced its worst fuel crisis during Bingu wa Mutharika’s administration, especially between 2010 and 2012. The crisis was largely attributed to foreign exchange scarcity.

During the era of founding president Hastings Kamuzu Banda, there was also a fuel disruption resulting from the Mozambican civil war.