More fuel shocks

In August 2012, the petrol price was N$9.96 per litre and N$10.36 for diesel (500ppm) in Windhoek, while the August 2018 prices are N$12.97 and N$13.31 per litre, respectively.

17 August 2018 | Energy

Independent economist Klaus Schade says the weakening of the South African rand means motorists in that country and Namibia will continue to fork out more for petrol and diesel.

The rand is having a torrid time of late and was trading at 14.57 to the US dollar yesterday afternoon.

“The South African rand and hence the Namibia dollar has come under pressure recently, owing to domestic factors such as the debate about land expropriation and global factors such as the United States' sanctions against Turkey, which resulted in investor sentiment turning against emerging market currencies such as our currency,” Schade said.

According to information provided by the energy ministry, under-recoveries for the month of June stood at N$0.63 per litre for petrol, N$0.57 for 500ppm diesel and N$0.56 for 50ppm diesel.

As a consequence, fuel prices would likely have to increase in order to recover losses that fuel retailers may suffer as a consequence.

“So far, the National Energy Fund (NEF) has absorbed under-recoveries (losses from the sale of fuel). If under-recoveries continue, the NEF will most likely increase prices in order to recovery losses,” Schade said.

Energy minister Tom Alweendo said Namibia's fuel is still cheap compared to other countries in the region.

He was responding to Namibian Sun queries regarding the escalating fuel prices in the country, as well as the region, which have motorists up in arms and battling to make ends meet.

For the better part of the year, local motorists did not experience any fuel hikes except for the months of June and August, which also saw an increase in the fuel tax.

“The ministry cannot really contain the increases, given what influences them. However, the ministry uses the NEF to cushion the increases by subsidising the pump price. At N$12.97 per litre, petrol is still cheap,” Alweendo said.

Namibians can count themselves lucky that they do not pay as much as motorists in other southern African countries, with the exception of Botswana.

Energy permanent secretary Simeon Negumbo explained that factors such as insurance, freight costs and the cost of the fuel itself all pay a part in what motorists are paying.

“The basic fuel price is mainly made up of cost, insurance and freight. The domestic levies and margins are then added on top of the other costs to come up with a final pump price per town,” explained Negumbo.

In instances where the fuel price is lower than the market determined prices, a cost-recovery model is used to ensure that prices are adjusted upwards to create equilibrium in the market.

The cost-recovery model is also used to adjust prices downwards to the level determined by the market to bring prices to equilibrium, Negumbo explained.

Explaining the price differences across the region, he said the Botswana pula gives motorists in that country some respite from rising fuel costs, while the South African government does not subsidise fuel, as is the case in Namibia.

“South Africa does not subsidise its fuel; all costs are passed on directly to consumers. Botswana's pula is a bit stronger than the Namibia dollar and hence Botswana has some comparative advantage in international trade.”

Schade said Namibian motorists can be consoled by the fact that fuel is cheaper here than in South Africa, where petrol prices have now hit N$16 a litre in places.

“Namibia's per capita income is higher than in most neighbouring countries except for Botswana and South Africa. Hence, fuel is more affordable in Namibia than in our neighbouring countries with the exception of Botswana, where it is cheaper,” Schade said.

Despite the increases witnessed, fuel prices are cheaper, according to Schade, relative to 2012 price levels and inflation.

“In August 2012, the price for petrol 95 was N$9.96 per litre and for diesel (500ppm) it was N$10.36 per litre in Windhoek. In August 2018, prices are N$12.97 per litre and N$13.31 per litre, respectively.

“However, taking inflation over the years into account prices are currently lower than they would have been, had they increased at the same pace as inflation. Adjusted for inflation since 2012, 95 petrol would cost N$13.85 per litre and diesel 500ppm N$14.41 per litre,” said Schade.

“Hence, for motorists who have received inflation-adjusted salary increases over the years, fuel has become even more affordable.”

Recently, South African motorists took to the country's highways to demand lower fuel prices.

Main roads and highways in Pietermaritzburg were blocked by trucks parking in the road.

The protest came after the fuel price saw five increases this year, with more increases expected.

This according to the Automobile Association (AA), which was commenting on unaudited July mid-month fuel price data released by the Central Energy Fund.

On Monday, supporters of former South president Jacob Zuma called on voters to boycott next year's general elections if political parties failed to pressure President Cyril Ramaphosa to curb petrol price increases.

People Against Petrol and Paraffin Price Increase said they had requested several political parties to be part of the protest, but only Black First Land First (BLF) and the lesser known National Peoples Ambassadors attended.

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