How Lapses at BERA Cost the Economy

For the months of April and May, the transport industry and other consumers of fuel have been paying higher prices for fuel unfairly because of Botswana Energy Regulatory Authority’s (BERA) prolonged delay in adjusting fuel prices in line with global fuel trends. Because of the higher fuel prices, transit trucks travelling on the Trans-Kalahari Corridor (TKC) and the North-South Corridor (NSC) choosing to fuel in South Africa, Zambia and Namibia, resulting in loss of fuel sales by fuel companies operating along the transit routes. [ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,3,4" ihc_mb_template="3" ] BERA has now announced a reduction in fuel prices effective Tuesday 20 June 2023 in which the retail pump price of unleaded petrol 93 decreased by 22 thebe per litre, for unleaded petrol 95 by 14 thebe per litre, for diesel 50ppm by 227 thebe per litre and for illuminating paraffin by 241 thebe per litre. A decrease in fuel prices is normally made in response to a reduction in global fuel prices, which usually results in the cost of importing fuel into Botswana being significantly lower than the price of selling fuel. Over-recoveries since April According to an announcement by Marketing and Communications Officer at BERA, Tshepang Monare, these adjustments were based on an analysis of the movement of petroleum product prices for the month of May 2023 where both crude oil prices and international refined product prices decreased. But there had been similar price movements in March and, accordingly petroleum industry experts, BERA should have adjusted fuel prices in April 2023. According to the April and May fuel slates that BERA has shared with The Business Weekly & Review , it is evident that fuel companies have been recording fuel over-recoveries for months since April, but the regulator did not adjust the prices accordingly. On 22 May this year, more than a month ago, The Business Weekly & Review sent a questionnaire to Monare and his colleague, Merapelo Tautona, who is a petroleum product pricing specialist at BERA, seeking to understand why there had been delays in adjusting fuel prices despite the over-recoveries recorded since April. Effects on transport operators The Business Weekly & Review also wanted to understand the model or processes followed by BERA in adjusting fuel prices in over-recoveries and under-recoveries. Further, this publication asked BERA whether or how delays in adjusting fuel prices have effects on fuel companies and transport operators. However, more than a month ago after contacting BERA, there has not been a response from the regulator. Inspite of BERA’s initial acknowledgement of the inquiry, follow-up emails were never responded to. What this publication has established is that because of global fuel price movements, fuel companies in Botswana have been recording over-recoveries for over two months but BERA was in no rush to adjust fuel prices on the slate to be aligned with global fuel price movements. As a result, there have been ripple effects. Fuel consumers have been paying high fuel prices unfairly despite a decline in global fuel prices, thus affecting the cost of living. Further, in addition to ordinary motorists, public transport operators and trucking companies were also paying higher prices when they should have been paying less, leading to higher overhead costs and squeezing their profit margins. Import parity Between March and May 2023, it was cheaper to import fuel but it was sold at higher prices by retail pump stations. To put it another way, for the past three months it has cost less to import fuel than before, but the fuel pump prices set by the government remained the same, meaning that there have been over-recoveries by fuel companies, the likes of Shell, Engen, Caltex and Total between March and June 2023. According to the April 2023 fuel price slate, the import parity price for petrol 93 was at P10.30 per litre, petrol 95 was sold at P10.48 per litre while diesel at import parity price was sold at around P9.95 per litre. The Import Parity Price (IPP) is the price of a product that is imported at the border, which includes international transport costs and tariffs. The government, through BERA, then sets recommended retail fuel prices for filling stations looking at price movements and the cost at import parity. Further, the April 2023 fuel slate shows that fuel prices for ULP93, ULP95 as well as diesel were sold at P14.41, P14.80 as well as P16.17 per litre respectively. According to the May 2023 fuel slate, it is evident that there was a downward global fuel price movement because the import parity price declined as compared to that of April. The cost of importing ULP93, ULP95 and diesel was P9.71, P9.98 thebe and P9.47 per litre respectively but prices at pump stations remained the same as those of April 2023. This means that there were over-recoveries, yet BERA delayed in swiftly adjusting prices in accordance with the global price movements. Ordinary motorists Transport operators, especially large Botswana-owned companies, say when there is a delay in adjusting prices downwards, they take a beating. Fuel accounts for about 40 percent of their operating costs, so any slight change - whether upwards or downwards - has a significant impact on them. The same applies to public transport operators who make less profit when fuel prices are high. By delaying a downward price movement, public transport operators spend more on fuel unnecessarily and unfairly, which reduces their profit margins. Similarly, other consumers of fuel, including ordinary motorists and farmers, also end up spending more on fuel when they should not. This also heavily affected Botswana-owned fuel and service stations along the Trans-Kalahari Corridor (TKC) and the North-South Corridor (NSC). The Business Weekly & Review has established that long-haul trucks transporting goods from South Africa to Zambia, the DRC and Namibia and further prefer using these routes because of their good condition. However, when fuelling and re-fuelling in Botswana becomes costlier, they use alternative routes, which results in the Botswana-owned fuel stations along these routes losing out on fuel sales. Over P1 billion per year Monthly fuel sales to the transporters are conservatively estimated at 6.0 million litres along the TRC and at 8.5 million litres along the NSC. Thus, an estimated total of 14.5 million litres per month is consumed along these transit routes, which cumulates to around P84 million monthly and over P1 billion annually. However, because of delays in fuel adjustments, some transporters preferred fuelling in other countries, which resulted in the routes losing P24 million worth of sales in two months or around 30 percent of their sales. This means that government levies also recorded a decline. Unlike in Botswana where lapses and delays are quite routine and losses to the economy astronomical, energy regulators in countries like Zambia, Namibia and South Africa adjust fuel prices in line with global fuel price movements promptly and the economic benefits are accordingly tremendous . [/ihc-hide-content]

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How Lapses at BERA Cost the Economy

Unlike in Botswana where lapses and delays are quite routine and losses to the economy astronomical, energy regulators in countries like Zambia, Namibia and South Africa adjust retail fuel prices in line with global fuel price movements promptly and the economic benefits are accordingly tremendous.

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How Lapses at BERA Cost the Economy

Unlike in Botswana where lapses and delays are quite routine and losses to the economy astronomical, energy regulators in countries like Zambia, Namibia and South Africa adjust retail fuel prices in line with global fuel price movements promptly and the economic benefits are accordingly tremendous.

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