Price pains: Govt pledges to intervene
Mbongeni Mguni - Pauline Dikuelo - Thabo Lewanika | Monday July 4, 2022 06:00
Available data indicates that at their latest levels, motorists in Gaborone are paying 81% more for Unleaded 95 petrol than they were in June last year.
And while the Botswana Energy Regulatory Authority (BERA) indicates that even with the latest increase, the pump prices are not yet reflective of the costs oil companies are incurring to bring the supplies over the border, the regulator is reluctant to state how much more fuel prices could or should rise.
The actual cost of bringing fuel to the pumps is a “moving target” BERA CEO, Rose Seretse told a media briefing on Monday, explaining that Russia’s invasion of Ukraine and resultant havoc in global oil markets was the driver of higher fuel prices.
For its part, government has vowed to take unspecified action to protect ordinary citizens from the runaway pump prices and the threat of inflation spiralling beyond its current 14-year high of 11.9%.
“There are considerations that Cabinet deliberated on and while I cannot speak to the detail, I can say relevant Cabinet ministers have been tasked with looking at interventions to cushion Batswana and businesses from these price increases,” acting Minerals and Energy minister, Thulaganyo Segokgo told journalists on Monday. “Ministers have been tasked and so you can expect in a fairly brief space of time to hear, perhaps the Minister of Finance, addressing on how these interventions will be done.”
While Segokgo did not detail the planned interventions, analysts expect that government could act by either temporarily reducing or removing the various levies which make up the overall fuel price. These include the fuel levy which was increased by P1.00 last April and the National Petroleum Fund (NPF) levy which is charged at the rate of 13.5 thebe per litre.
The NPF levy is particularly a sore point for Batswana, as the fund continues to collect from motorists while being completely unable to perform its duty of cushioning the economy against frequent fluctuations in oil prices. Part of the reason for the NPF’s failure dates to a P230 million scandal that erupted in 2017, but this week, ministry officials said whatever replenishing of the Fund that has been occurring is being wiped out immediately by the rapid escalation of international oil prices.
The NPF was established to, among others, pay oil companies the difference between their costs for importing fuel into the country and the pump prices set by government. The gap between the prices of refined oil coming into the country and pump prices, a situation known as under-recovery, has been prevailing for years, although the situation has significantly worsened since Russia’s invasion of Ukraine.
“The NPF gets P14 million each month and we speak, we are under-recovering by about P100 million and you can see that we are in a serious deficit,” a senior ministry official said this week.
With the NPF empty, government is under pressure to pay the estimated P1.3 billion in arrears owed to the different oil companies operating in the country, with some indicating that their books were under severe strain as a result of the situation. Those companies that find themselves running low on capital are forced to borrow to continue supply fuel, but while they pay interest on these loans, their arrears from government are zero-interest.
Government has in the past diverted funds from slow-moving budget items to pay the oil companies and ensure security of supply to the economy.
“Cabinet did consider this issue of debt and a decision was made to direct the amounts collected under different levies, going forward, that these will be used to pay off and reduce the debt,” Segokgo said. “This will be reviewed from time to time.”
Funds of about P380 million have been sourced in the interim to ease the arrears.
Even as government pledges to intervene, a snap survey by Mmegi around Gaborone on Thursday indicated the level of despondency that has crept in among ordinary Batswana as the cost of living has risen above their reach.
Refilwe Morake, a security guard, said the sharp rise in inflation meant she could barely afford any disposable income.
“I cannot even afford to pay my rent. All I work for is to be able to buy food and pay for my transport,” she said.
Charles Phitlho, who is self-employed owning a car wash in Fairgrounds told Mmegi that business has been tough ever since the increase in fuel prices began.
“People no longer bring their cars to work and as a result there are no cars for me to wash.Go thata tota.”
University of Botswana student, Kago Bosele said staying off-campus has become a nightmare due to the cost of attending classes.
“Ever since transport fares increased because of the higher fuel prices, I cannot afford to go to school every day simply because I cannot afford it.”
Bofelo Nzwaligwa who works at one of the franchise restaurants in Airport Junction lamented the fact that most private sector employers have not adjusted salaries for workers, despite the sharp increase in the prices of goods and services.