Sunday, July 3, 2022

Analysts fear fuel crisis might slow down economic growth

Analysts say while expectation that Botswana’s economy will grow by 7.9 percent this year is realistic, the fuel crisis, if not managed, could cripple growth.

The global economic recovery that is gaining momentum, according to analysts, is said to be triggering the soaring fuel prices.

Although the fuel supply shortage that was recently experienced in Botswana was due to the planned maintenance shutdown of some of the refineries in South Africa and the reduced operational capacity of the Durban-Gauteng fuel pipeline, analysts maintain the international scenario may still affect the country.

“The United States, China and Europe have seen economic recovery gaining momentum. There are positive economic indicators more than expected. This will exert pressure on fuel prices as fuel demands grow. What is happening in the international scene will affect South Africa and us,” says Research Analyst at Motswedi Securities, Karabo Tladi.

The same sentiment is shared by another analyst, Aobakwe Mokgethi, of Capital Securities.
The government says the fuel supply situation has not yet normalized. This notwithstanding, the government says, together with the Oil Industry, it has put efforts to manage the situation successfully.

The government says the shortage is likely to continue up to March 2011. “We will continue to work diligently with the Oil Industry to manage the situation in order to avoid any interruptions to the economy,” the government says.

“Botswana sources almost all of her petroleum product requirements from the Republic of South Africa (RSA) through multinational oil companies. The products are sourced from South Africa mainly through the Tarlton Depot in the Gauteng area. The Tarlton depot is in turn fed from refineries in Durban through a multi product pipeline. This pipeline is currently operating at only 80% of its operational capacity due to aging. A bigger pipeline is under construction and is expected to be complete by 2013,” according to Kebonye Ditiro, spokesperson at the Ministry of Minerals, Energy and Water Resources.

The government says some refineries such as Engen and Sasol in South Africa had planned shut downs for maintenance during the months of October-November 2010.

“The Sasol refinery is back on stream and the Engen refinery is expected to be out of operation until February 2011. The unavailability of products from these refineries and the slowing down of the pipeline by 20 percent has therefore resulted in reduced supplies into Botswana since the end of October 2010. Fuel supplies have slowly been deteriorating, with the week beginning 6th December 2010 being the worst so far, prompting the Government to take intervention measures,” the spokesperson said.

The current storage capacity of the government storage reserves stands at 22 days of national consumption equivalent, (nominal) for both petrol and diesel.

Despite the shortages, the government says the situation has not affected the economy to a large extent since it was “prudently managed through coordination of fuel supplies by the government in collaboration with the oil industry and the use of government strategic stocks”.
The government plans to enter into long term contracts with Mozambique to supply the country with fuel.

Ditiro says measures are in place to avert a similar situation.

“The government is currently procuring products by other means, for instance through involvement of citizen companies which are allowed to pick the product from RSA. In addition the government is pursuing the use of alternative sources and routes of fuel supplies such as Mozambique and Namibia,” the spokesperson says.

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