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Policy brief highlights ills in Zambia’s petroleum sub-sector


The Policy Monitoring and Research Centre (PMRC) has published a policy brief highlighting the challenges faced by transporters in the petroleum sub-sector in Zambia.

Among the challenges established by the report released on Thursday were insufficient product storage, unfair foreign competition, illegal fuel vending, smuggling and inefficient Pricing of Petroleum Products, among others.

On insufficient product storage, the report stated that the current ERB model for pricing petroleum products was not efficient due to the use of historical exchange rate and international price parameters that significantly differ from current rates.

“All Oil Marketing Companies (OMCs) indicated that the use of the monthly average interbank commercial rate published by the Bank of Zambia has largely resulted in exchange rate losses for them especially that the Zambian economy has been under pressure and the Kwacha largely depreciating in the last six months of the interviews,” the report stated.

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The report urged government to consider revising the petroleum pricing model by using more recent or forecasted rather than historical exchange rates and international oil prices to minimise OMC foreign exchange and financial losses resulting from adverse movements in currency and international oil prices.

Various locally-owned fuel transporters and OMCs interviewed highlighted unfair competition from foreign OMCs and transporters as another key challenge.

“Since May 2021, the Zambian government has required any entity importing petroleum products into Zambia to ensure that at least 50 percent of the product is transported by a local transporter in accordance with the provisions of Statutory Instrument (SI) No. 35 of 2021.

“This legal requirement was passed to ensure that Zambians can also benefit from the jobs and wealth in the petroleum transportation sector, which sector has historically been dominated by foreign owed businesses,” the report stated.

On illegal fuel vending and smuggling, OMCs reported fuel smuggling activities, whereby foreign trucks carrying unmarked petroleum earmarked for exports to markets, such as the Congo DR, were diverted and sold on the local market.

It was recommended that government would need to arrest illegal vending and smuggling of petroleum products.

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