Puma Energy says it appreciates that like other countries, Botswana is trying to carefully manage the situation by trying to limit the impact of fuel prices on citizens while also ensuring that Oil Marketing Companies (OMCs) have the financial means to continue supplying the market.
Fadi Mitri, Puma Energy’s Head of Africa, says Botswana energy supplies are exposed to three challenges: the international energy crisis, regional changes in supply patterns that may be exacerbated by the decreasing refinery capacity in South Africa, as well as domestic challenges in the slate deficit at the National Petroleum Fund. “As many of you have reported, there is an outstanding slate, which is intended to be a balancing mechanism to help cushion fuel prices,” Mitri said in a media roundtable recently. “However, with rising prices the slate has grown to an unsustainable level.”
The government currently owes fuel companies over P1.2 billion in under-recoveries. Mitri said this outstanding balance puts pressure on oil marketing companies and squeezes their availability of working capital and financial position, making it more and more difficult to secure supplies from the international market. “We are keen to work with the various government officials and with the Department of Energy of the Ministry of Mineral Resources, Green Technology and Energy Security,” he said. “We are in a dialogue with the government to address these vulnerabilities.” By working together, he added, a mechanism that can help ensure security of supply may be found.
Impact of energy crisis on Africa
The Russia-Ukraine war has significantly disrupted global energy markets and is also having wider implications on other sectors and trade in general, Mitri noted. The result is a continued rise in fuel prices globally, more than 65 percent for diesel, as well as significant volatility. “This rise in fuel prices is disproportionally impacting energy-importing African countries and impacts inflation, creates current account imbalances and limits foreign exchange availability,” he said.
Africa hard hit
Mitri pointed out that energy importing African countries have historically relied on trade flows either directly or indirectly from Russia or the Middle East. West Africa, for example, imports 24 percent of its diesel and 90 percent of residual oil from Russia, directly or indirectly, while the rest of Africa relies mainly on flows from the Middle East.
But these flows are becoming more and more constrained, if not unavailable. “As a result of these shifting trade flows, demand for longer distance shipping and logistics is increasing, resulting in considerably greater transit time and cost,” he explained. He noted that this is even more challenging for countries with limited fiscal flexibility or countries that are not benefiting from high value exports like minerals and other commodities that are experiencing high prices “In summary, we can expect the situation to become more difficult for countries to secure energy supplies, and this will affect businesses, tourism, healthcare and so on,” Mitri said.