Today, I reproduce a Business Unpacked entry published on September 9 2022 when a prolonged fuel crisis, largely due to foreign exchange shortage, hit the country:
With each day break, a cloud of uncertainty is hovering over the availability of fuel at pump stations in Malawi and stirring panic in the process.
To Malawians, no fuel shortage is small or temporary as they say once bitten twice shy. Memories are still fresh of the genesis of the fuel crisis that reached its peak in 2011-2012 which also started in similar fashion, as isolated pockets of dry pumps, from around 2010.
This week some motorists went on a wild goose chase of every fuel tanker they saw on the road only to discover, in one case in Lilongwe, that even the carrier was hunting for fuel too!
Productivity is at stake in an already battered economy as people spend hours searching for fuel to undertake various errands, including delivery of goods and services.
Businesses, reeling under the impact of prolonged electricity rationing due to insufficient generation capacity, are equally bearing the brunt as indicated by Malawi Confederation of Chambers of Commerce and Industry president Lekani Katandula in The Nation edition of September 7 2022.
Typical of crisis times all fingers point at players in the fuel sector, namely Malawi Energy Regulatory Authority (Mera), National Oil Company of Malawi (Nocma) and Petroleum Imports Limited (PIL) .
In times like these no amount or style of explanation convinces the consumer as all they want is the commodity. Tough.
To be honest, Malawi will continue to be haunted by fuel crises in the foreseeable future unless some tangible action is taken to improve things on the production side to generate more foreign exchange. Thus, the elephant in the room is forex, fuel’s Siamese twin.
With no single drop of oil in the ground, the country needs to export more goods and services than it imports to generate foreign exchange for the importation of essential goods and services such as pharmaceuticals, fuel, construction materials, industrial and motor vehicle spare parts as well as luxuries, notably consumer goods.
Reserve Bank of Malawi director of financial markets Kisu Simwaka is on record as having said that the foreign exchange the country generates is only enough to cover 33 percent or one third of the import needs. In his presentation in 2021, he asked the question: Where does the 67 percent come from?
Each month, Malawi spends an average of $250 million for imports. Thus, at $197.1 million last year, annual revenue from tobacco, the country’s major foreign exchange earner, was not even enough to cover a month’s import bill.
The fuel supply market is one complex sphere where, in most cases, suppliers demand upfront payment or proof of payment before releasing the commodity that drives economies worldwide.
The reality on the ground is that lately, it has been by the “Grace of God”, as it were, that both State-owned Nocma and private sector consortium PIL have been managing to bring in fuel amid forex shortages. The two have struggled to source letters of credit to secure financing to suppliers through foreign banks and have mostly delivered based on the goodwill of some suppliers. Not a sustainable way to run this business, I must say. Right now, PIL is yet to have its letter of credit for a $22 million payment honoured.
The perennial forex shortages reflect our authorities’ penchant for quick-fix solutions to solve complex issues at the expense of sustainable lasting solutions.
The ever-widening trade deficit does not help matters either as the country is mostly subtracting, not adding to the forex basket on net basis.
In as long as forex continues to be scarce, not even a programme with the International Monetary Fund will bring fuel in the service stations. The shortages will continue haunting us.
Postscript: I read a statement from Mera on May 1 2023 attributing the prevailing fuel stockouts to the International Labour Day which affected delivery logistics.
Like seriously? Surely, this is not the first time we are commemorating Labour Day in this country. In fact, we have had much longer holiday seasons such as Easter and other extended ones with no impact on logistics.
For all I know, the essential service providers such as Malawi Revenue Authority (MRA) do work in shifts during public holidays to ensure continuity. The other day, Mera attributed the shortage to an international artist’s performance… I find some of the explanations or justifications Mera gives as being an insult to Malawians’ intelligence.
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