Parastatals benefitting from fuel levies must brace for the worst, as the Ministry of Mines and Energy has resolved to extend the levy reduction amnesty until further notice, thus lengthening the financial difficulties of companies such as the Motor Vehicle Accident Fund, Natis and Namcor whose levies were cut by 25% and 50%.
The companies are crying as they feel the financial crunch, which has already led to some streamlining their operations and reduce the provision of much needed services to the public. MVA Fund said they were losing about N$11 million in a month, and by December they would have depleted their N$110 million withdrawal service. Meanwhile, RFA which was also in the red, is fortunate as the government has decided to reinstate its fuel levy to 90 cents, thus saving it from loses of more than N$300 million for the past months.
The levies were instituted in May for a period of three months and should have ended this month, as a means to cushion consumers from the brunt of high fuel prices.
The Ministry of Mines and Energy announced today that it has resolved to maintain fuel prices at N$22.28 and N$22.77 for petrol and diesel, respectively, for the month of August.
This came as a result of a reduction recorded in July fuel prices compared to June, of which petrol prices dropped by USD29 from USD159.267 to USD 130.463, as well as diesel, which the ministry’s spokesperson Andreas Simon, described as a huge decrease.
The prices are only for Walvis Bay pumps, while across the country they will be adjusted accordingly.
Cabinet is yet to pronounce itself on the longevity of the reduced levy, as the ministry made submission seeking for a way forward and what other austerities can be implemented.
There will be no more shutdown of service station across the country as planned earlier by the Fuel and Franchise Association of Namibia (FAFA), as the ministry has decided to increase the fuel dealer margin by 50 cents, translating to an increase of 163 cents from the initial 113 cents.
FAFA had threatened to close down if their demands were not met, as they argued they were running at a loss.
The association had complained to the ministry that they were operating at a ridiculously low 5% gross profit which they mainly use to service salaries, bank charges, rental and other operational costs. Earlier this month, FAFA had requested the Minister’s intervention as they wanted the vertical integration of wholesalers on retailers, which means that the wholesalers were now engaged in the trading of fuel, of which the association said was encroaching on their market. In turn the ministry said, vertical integration was prohibited, while on the issues of the banks, it said, consultations will be made to find a common ground. The association had further called for a moratorium on the issuance of fuel retailing licences.
FAFA’s chairperson Hendrik Kruger, welcomed the increment saying it’s a good step in the right direction, although he said, it is not exactly what they [50 cent] needed. “In two weeks we shall be dealing with the issue of vertical integration by fuel wholesalers including banks who are involved in the trade through mediation of services, because these are the cost drivers. Banks charge you for swiping and other charges, thereby tapping into our profit margin. We are, however, appreciative of the minister’s goodwill and have acted positively to our request of increasing the dealer margin,” said Kruger.
In addition, he said, FAFA will now look at the methodology of how to scientifically conduct a margin survey. He says this will then determine how to implement, at how much and when to increase the margin.