Details of the new government-to-government (G2G) arrangement of importing fuel show that it will be fully operational by March 2025 and State-owned National Oil Company of Malawi (Nocma) will be the sole importer.
Under the arrangement President Lazarus Chakwera announced in a national address on Wednesday night, Nocma will be backed by flexible six-month letters of credit (LCs), giving it up to 180 days to pay suppliers.
In a written response yesterday, Minister of Energy Ibrahim Matola said government is negotiating an emergency G2G supply of fuel to cover the intervening period pending full rollout in March.
Meanwhile, government has prepared an amendment Bill on the Liquid Fuels and ongoing Mid-Year Budget Review Meeting of Parliament to facilitate the arrangement. Gas Act for review during the
Matola said Nocma will be procuring large quantities from international oil companies such as Abu Dhabi National Oil Company (Adnoc) and Emirates National Oil Company (Enoc), both from the United Arab Emirates (UAE) and from Aramco of Saudi Arabia.
He said: “Currently, Nocma uses so many suppliers and so does Petroleum Importers Limited [PIL], but these suppliers import in smaller quantities each, as such, they don’t enjoy quantity discounts. Under the arrangement, Nocma will likely be enjoying them.
“Currently each fuel importer applies for foreign exchange to so many commercial banks to pay for fuel imports. As such, the demand for foreign exchange is exaggerated, pushing the value of the local currency down.”
Matola said with Nocma alone applying for the foreign exchange, the correct demand will be reflected, resulting in lower than what is in the Open Tendering System.
He said: “The value of the local currency will, thus, either stabilise or it will appreciate under the G2G framework. The benefits of the G2G thus far will accrue to the
although we are aware that fuel trading should ordinarily be left to the private sector.”
Malawi needs $600 million annually to bring in fuel, but generates just around $1 billion in forex every year. In total, the country needs $3 billion for its import bill.
The President said his administration will, therefore, strike the G-to-G fuel deals with more flexible payment arrangements to avert perennial fuel stock-outs, which worsened in the past six weeks.
A source familiar with such deals confided in The Nation that the arrangement means importing directly from oil producing companies or refineries, including State-controlled ones, under better terms such as extended credit facility and better prices.
The source said the deal will in the meantime be facilitated under the Government of Kenya arrangement while processing Malawi’s own facility.
The amendment Bill we have seen also aims to “ensure efficiency, reliability, enhanced regulatory compliance and operational transparency, in the supply of diesel and petrol, through Government-to-Government fuel supply arrangement”.
Section 6 (A) (1) of the Act will be amended to provide for the importation of diesel and petrol into the country through Government-to- Government fuel supply arrangement.
Reads the section: “The minister shall nominate a government agent to be responsible for importation of diesel and petrol into the country through Government-to- Government fuel supply arrangement referred to under subsection (1).
“(3) The minister may, through direct negotiation and on recommendation of the government agent, arrange for the importation of diesel and petrol into the country through Government-to- Government fuel supply arrangement.”
Re a c t i n g t o t h e arrangement, National Advocacy Platform executive director Benedicto Kondowe said the new procurement model should lead to more favourable terms, a reduction in fuel costs and mitigating the burden on consumers while enhancing national economic resilience.
“To achieve this, transparent mechanisms must be put in place to prevent corruption and ensure accountability in the negotiation and management of these agreements. Past procurement processes have suffered from mismanagement and this model should break that cycle,” he said.
During his address on Wednesday evening, the President said he constituted a coordinating committee three weeks ago to facilitate and execute all aspects of this G-to-G policy chaired by the Minister of Energy, which also has ministers of Finance, Trade and Industry, Justice and Foreign Affairs as members.
Currently, Section 37 of the Public Procurement and Disposal of Assets Act prescribes open tender as the preferred method, although it provides exceptions to use other methods such as restricted tendering and single sourcing.
