CAMA once more lobbies for MERA to strictly follow the mandate of Automatic Pricing Mechanism on fuel

The Automatic Pricing Mechanism that was being used before

* MERA has one of the best mandates and laws in regulating the fuel market by ensuring that consumers are protected

* By paying regulated fuel prices and that fuel importers are adequately compensated for their investments for fuel supply continuity

By Duncan Mlanjira

The Consumers Association of Malawi (CAMA) has once more lobbied that Malawi Energy Regulatory Authority (MERA) to strictly follow the mandate of Automatic Pricing Mechanism on fuel price increases to avoid the commodity’s scarcities.

In its statement, entitled; ‘Fuel scarcities collapse Malawi’s economy’ — following the six week dry pumps across the country, CAMA maintains  that the challenges “were eminent due to import challenges for fuel that had put pressure on financial instruments used for fuel imports which resulted in MERA accumulating debts of over MK2 trillion as a result of lower fuel pump prices”.

Issued by Executive Director, John Kapito, CAMA says it has noted that the current nationwide fuel scarcities have had a huge negative impact on prices of goods and services.

“Our market inspections have shown that most goods on the market have gone up by an average of 50% while transport costs have gone up by 70%.

“For example, sugar has gone up by 33% while cooking oils have gone up by 57%, soaps by 70% and the worst has been increases in bus fares and general transportation of goods which have gone up by an average of 80%”.

CAMA maintains that it has lobbied for the regulated fuel adjustments — upward or downward, saying: “The failure by MERA to use the Automatic Pricing Mechanism (APM) exposed the fuel industry and market to more forex challenges and continued losses from fuel pumps.

“CAMA warned the country about the impending fuel scarcities taking into consideration that scarcities are more harmful than gradual increases of fuel prices on the economy, transporters and consumers.

“We warned Malawians about challenges they would face like queuing and spending day and nights at filling stations and the impact of such scarcities on the economy as all business activities come to a standstill.

“Unfortunately, this was met with negative comments from consumers and one particular Member of Parliament, who spoke under the influence of ‘Ambwiye Mtengeni’ liquor without understanding the implications of such comments.

“We were, however, thankful to the Parliamentary Committee on Natural Resources & Climate Change that understood the challenges and how Malawians would be affected of fuel scarcities, and it is from this background that both CAMA and the Parliamentary Committee are exonerated from the advices they had made which have now turned into a nightmare for both consumers and the economy.”

Kapito thus stresses that MERA has one of the best mandates through the Energy Regulatory Law, that provides its independence and it provides methodologies that are used transparently to make fuel pump prices.

“Unfortunately, MERA’s independence is under threat and challenged where it is now failing to asset its independence and provide technical and financial advice on the pricing of fuel in the country.

“As a result of their failure to implement their mandate, MERA has accumulated huge losses through unpaid compensations to fuel importers and other levies as subscribed by the Law.

“The failure by MERA to use Automatic Pricing Mechanism which is meant to assist their decision making — whether to reduce or increase the price — has created the current challenges on the current fuel scarcities which has rendered the whole economy to a standstill.

“MERA’s mandate allows it independently to announce gradual increases and decreases without any interference from the Executive and Parliament — this is to ensure smooth delivery of their mandate.

“The questions that consumers should be having now is whether it is proper to have gradual regulated fuel pump prices or create unnecessary scarcities and queue for days and nights and buy the same fuel from the black market at double the pump prices.

“We wish also to ask MERA to conduct civic and awareness sessions through the Parliamentary Committee on Natural Resources & Climate Change with selected members of parliament that seem ignorant about the regulated fuel procedures.”

Meanwhile, in his national address on Wednesday evening, President Lazarus Chakwera announced that as a short term measure, towards achieving a long-term fuel security, he constituted a Coordinating Committee three weeks ago, to facilitate and execute all aspects of a government-to-government (G-to-G) fuel procurement arrangement.

The Coordinating Committee is being chaired by the Minister of Energy, Ibrahim Matola that include as its members Ministers of Finance, Trade & Industry, Justice, Foreign Affairs, Cabinet Secretary, the Governor of the Reserve Bank, the Attorney General, the Director General of the Procurement Authority, and the chief executive officers of MERA and National Oil Company of Malawi (NOCMA).

He added that the committee is being supported by a technical committee of technocrats from the respective Ministries, and they all have his “instructions to work with speed to secure the first G-to-G agreements for our country.”

And as a first step in pursuing this, the President announced that he has accepted an invitation from the President of the United Arab Emirates (UAE) to visit him in Abu Dhabi next week, at UAE Government’s “own expense, to discuss [the G-to-G arrangement] and other matters for the long-term fuel security”.

He reported that the scarcity of fuel at pump stations was due to a 10-day fuel imports suspension that created the fuel queues over the past six weeks, saying the country’s monthly fuel demand is at an average of US$50 million per month, which is used by two main fuel importers; NOCMA and Petroleum Importers Limited (PIL).

Unfortunately, the President said, through no fault of their own, the rate at which the country generates foreign exchange “has not kept pace with the growing demand for fuel, making these two importers unable to raise enough forex from the market to import the required volumes of fuel”.

He gave an example that in August, NOCMA only raised US$23 million of the required forex, while in September and October, that number fell below US$20 million — increasing NOCMA’s debt to suppliers to US$72 million in October and resulting in a 10-day suspension in NOCMA’s access to fuel imports.

“It is this 10-day suspension that created the fuel queues over the past six weeks, forcing many of you to suffer long days and nights at fuel stations, as well as disruptions to your lives, work, and businesses,” he said.

“Knowing the frustration you were feeling and the urgency of the situation, at the very start of the crisis I instructed the Treasury to contact our partners at BADEA, who responded by providing a US$50 million revolving credit facility.

“I also engaged the Reserve Bank to ramp up efforts to access more foreign exchange through commercial banks, and it is these interventions that have enabled NOCMA and PIL to bring the fuel that is now being made available in the filling stations, and tonight I must thank you for your patience during the six weeks we have been having meetings in the night to resolve the fuel shortage.”

He reported that the availability of fuel is only a short term solution, saying: “The challenge that NOCMA and PIL face to access forex from the market in the Open Tender System we use as a country to import fuel, has resulted in fuel supply disruptions at different times in the past 20 years.

“And it is time for us to take a different approach,” he said, while announcing that his administration has embarked on the process of transitioning Malawi from the Open Tender System for procuring fuel to a G-to-G arrangement “that will make our access to fuel more secure through better payment terms and cycles”.