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Gov’t slashes aviation fuel prices

BRIAN BENZA
Customers will hope for a cut in airfares following the reduction in aviation fuel prices
Government has reduced the price of aviation fuel by an average 20% as the state starts regulating prices in an industry that has been blamed for Botswana’s relatively high Jet A1 and aviation gas costs.

According to the latest Government Gazette, the price of Jet A1 has been reduced to P7 in Gaborone from P9.20 while prices in Francistown and Maun have also been reduced by 20% to P7.37 per litre and P7. 76 respectively.

The government says the regulation of aviation fuel is part of efforts to lure more airlines to operate in Botswana where the price of fuel per litre is considered to be amongst the highest in the world due to low economies of scale and logistical challenges. International oil company, Puma Energy Botswana which is 20% owned by the Botswana Public Officers Pension Fund (BPOPF), is the only supplier of aviation fuel.

 Other oil companies operating in Botswana are believed to have been discouraged from selling aviation fuel by the high costs of setting up the distribution infrastructure set against low trading volumes. “We welcome government’s decision and we support efforts to try and grow the aviation industry in Botswana. Although we are going to be affected by the decision, it gives us an opportunity to try and run the business more efficiently by looking at areas where we can further cut costs,” said Puma general manager, Mahube Mpugwa.  

 Before July 1, the government was only regulating the prices of diesel, petrol and

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illuminating paraffin. Speaking at the African Airlines Association (AFRAA) conference recently, the secretary general, Dr Elijah Chingosho mentioned that one of the factors that contribute to the poor performance of the national carrier amongst others is the high jet fuel price.

“The jet fuel price in Botswana is one of the highest in Africa, which severely negatively affects the competitive capacity of the national carrier,” he said. The relatively high price of jet fuel in Botswana has been blamed on logistics as well as economies of scale. Unlike other countries in the region, which use rail and pipeline to import fuel, the commodity is brought in by road into Botswana pushing up the cost. On the other hand, the low volumes used in Botswana have also contributed to the higher price with the country’s total consumption estimated at 15 million litres per annum while Namibia consumes 60 million litres per month. On average, the OR Tambo International Airport is estimated to consume about two billion litres of jet fuel per annum while the Lanseria Airport consumes about 700,000 litres.

According to IATA, African airlines made a loss of $700 million in 2015, a record loss that is expected to be followed by another significant loss of $500 million in 2016.



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