Fuel supply monopoly costs economy—study

 Malawi’s overreliance on trucks for fuel haulage is costly and prone to supply disruptions, leaving the economy vulnerable to shocks along the supply chain, according to a new study.

The study, commissioned by Puma Energy, one of the world’s global downstream energy business with operations in more than 35 countries including Malawi, notes that trucking lobbies in the country are often strong, equipped

 with the power to shutdown bulk transportation in the face of limited transportation alternatives, leading to inefficiencies and higher costs for the consumer.

Reads in part the study titled ‘Fuelling Africa’s potential: Bridging the gap in energy infrastructure 2024’: “Currently, Malawi is reliant on trucks for the supply of oil product, but rail and pipeline offer benefits as alternative means of product supply as well as reducing the environmental impact of transporting increasing volumes of oil products.”

It says repair to the rail line, along with coordination with the line operator, could cut logistics costs and help to diversify supply routes which would mitigate the risk of disruptions to supply into Beira [in Mozambique], or Dar es Salaam [in Tanzania], which are Malawi’s other key sources of supply for the imported product.

The report further notes that if truck loading and clearing procedures can be improved and streamlined and average driving speeds increased, cumulative savings in Malawi supply chains alone are estimated at about $204 million (about K357 billion) per year between 2024 and 2040 both for Beira, Nacala [in Mozambique] and Dar es Salaam corridors.

Data shows that Malawi fuel

 supply in 2022 comprised 4 200 truckloads from Beira, 990 from Nacala and 4 700 from Dar es Salaam either direct to customers or via the Lilongwe and Blantyre terminals with total loads forecast to grow by 125 percent to 22 000 truck deliveries into Malawi by 2040.

Nacala Logistics data shows that it costs an average of $0.06 (K49) to $0.08 (K66) per tonne per kilometre to transport goods by rail while freight or road transport costs $0.10 (K82) to $0.12 (K98) per tonne per kilometre.

Speaking in an interview yesterday, Transporters Association of Malawi spokesperson Frank Banda

said that while they have been advocating for a revamp of railway transport, foreign exchange challenges have increased inefficiencies and turn-around time for road transports.

He said: “As a result, fuel importers are having difficulties to pay supplies, which has also affected transporters.

“As we are speaking, we have 100 trucks stuck in Dar le Salam waiting for clearance and it has been three weeks. Meanwhile, we have to pay for costs incurred in those three weeks, making huge losses and sacrifice for the economy.”

Petroleum Importers Limited general manager Martin Msimuko was yet to respond to our questionnaire, but he is on record as having said importers save about 15 percent when on rail compared to road transport.

National Oil Company of Malawi deputy chief executive officer Micklas Reuben is also on record as having said the State-owned fuel importer targets to be hauling 20 percent of its fuel imports through rail and get the rest via road.

On average, Malawi uses 1.05 million litres each for diesel and petrol per day, according to Nocma data.

Malawi spends $600 million (about K1 trillion) on fuel importation per year, according Reserve Bank of Malawi.

The country pays 15 percent more on transport from the sea compared to other countries, according to a study by the Common Market for Eastern and Southern Africa.