PPDA blocks UAE fuel deal

 The Public Procurement and Disposal of Assets Authority (PPDA) has rejected the National Oil Company of Malawi’s (Nocma’s) request for a ‘No Objection’ to single-source procurement of fuel

 described as essential to avert a potential fuel shortage crisis in the country.

Among other things, Nocma also told the PPDA board that as of July 31 2024, it owed its suppliers $85.4 million which has resulted in frequent suspensions of deliveries.

On September 6 2024, Nocma requested the PPDA board to grant a ‘No Objection’ to single-source and restricted tendering to import 100 000 metric tons (MT) of fuel from His Highness Sheikh Saud bin Saqr al Qasimi of the United Arab Emirate (UAE), with payments to be made in Malawi kwacha.

In a brief response, PPDA spokesperson Kate Kujaliwa said: “The PPDA rejected Nocma’s request for ‘No Objection’ due to noncompliance with regulatory requirements. An alternative procurement method, previously approved, was recommended for immediate use to ensure fuel availability.”

In the document signed by Nocma chief executive officer Clement Kanyama and presented to the PPDA board, Nocma said the basis for single sourcing Highness Sheikh Saud bin Saqr al Qasmi is that Malawi faces a dire fuel stock out situation, which may soon result in a difficult to roll-back stock-out.

“Hence new strategies for overcoming existing challenges are required—immediately and over the time spans—short, medium to long-term.’’

The document said this will reduce over-concentration of supplier liability in fewer suppliers through increased supplier diversification and thus improve fuel supply security.

‘‘This is a solution for the short to medium-term, as the current suppliers are now unable to continue with provision of open credit above their limits.”

Nocma also indicated its inability to settle amounts due to suppliers, including Addax, Hass, and Camel Oil, who have provided open unsecured credit.

Reads the document: ‘‘The total amounts owed to suppliers at the end of July 2024, reached $85.4 million.’’

Nocma said the other rationale for the request for single sourcing and restricted tendering as well as payment of the fuel in Makawi kwacha is that ‘‘Nocma will be able to pay for fuel imports, which is currently not the case’’.

‘‘Nocma has also failed to establish letters of credits as part of nomination of fuel imports. This is the default contractual arrangement with all suppliers.’’

The document says Nocma’s monthly forex trading requirements are based on a consumption of 1.7 million litres per day, comprising 50 percent diesel and 50 percent petrol. The company’s import share is set at 60 percent, with PIL [Petroleum Importers Limited] and others importing

 the remaining 40 percent.

The company’s import share is increasing, as PIL is not able to secure open credit to match those obtained by Nocma, according to the Nocma presentation to PPDA.

The document said actual allocation of forex to pay for fuel imports has continued to decline, a development that has resulted in a ‘‘sustained decline in imports translating in depletion of the country’s strategic fuel reserves from holding on average 35 days stock cover to consistently less than 10 days for petrol and 15 days for diesel in the 18 months’ period—April 2023 to September 2024’’.

It said current stock cover days are at an all-time low.

Nocma officials were yet to respond to our questionnaire on how they plan to manage the fuel stock situation and the declining forex allocation for fuel imports.

But Treasury spokesperson Williams Banda said government is aware that Nocma deals with strategic commodities.

Said Banda: “Treasury is optimistic that the situation will be normalised using the available strengths and opportunities in the economy.”

Meanwhile, governance expert Charles Kajoloweka has expressed concern that a number of fuel procurement systems appear to be hijacked by what he described as ‘‘criminal demagogues, marred by intrusive political interests from the ruling elite and their business syndicates’’.

Kajoloweka, who is also the Youth and Society (YAS)executive director alleged that procurement laws are being ignored, and noted that there are ongoing criminal cases in court related to fuel deals.

Said Kajoloweka: “While it is commendable that PPDA has rejected Nocma’s request for ‘No Objection’, PPDA must provide reasons for its decision. This will help the public and accountability actors understand the dynamics and interests at play.

“We also suspect that PPDA is aware of the red flags raised by civil society against this procurement scheme, which is currently under investigation by the Office of the Ombudsman following a complaint by YAS.”