Report Exposes How Botswana Oil is distorting fuel market

Botswana’s Oil Import Mandate (OIM) is being blamed for reshaping the fuel market in ways that restrict private sector participation and introduce risks that could undermine national fuel security. That is the conclusion of a position paper commissioned for oil industry stakeholders and authored by economist Keith Jefferis of Econsult, which argues that both the design and implementation of the policy have created sustained uncertainty in the sector. Under the Botswana Energy Regulatory Authority (Amendment) Act of 2022, a 90 percent import quota was reserved in 2024 for the state-owned Botswana Oil Limited (BOL). The move has triggered strong resistance from the Oil Industry Association, which represents five international oil companies (IOCs) and three citizen-owned companies (COCs), citing market distortion, legal contradictions and risks to national fuel security. Among the key concerns raised are legal and regulatory contradictions. The paper, which was released last year, argues that the current framework contains a fundamental and “unworkable” conflict. While the OIM reserves 90 percent of imports for BOL, the paper said the amended Act prohibits the minister from imposing import restrictions on majority citizen-owned companies. In practice, COCs accounted for between 30 percent and 35 percent of the import market as of early 2025, making it mathematically impossible for BOL to achieve a 90 percent share while COCs remain unrestricted. This leaves the legal framework inconsistent and difficult to enforce. “The statutory provision for a 90 percent import mandate for BOL, while entrenched in law, has no effective implementation mechanism,” the paper said. “COCs are permitted to import fuel without direct restriction, although they cannot sell to IOCs or certain public contract customers. As at early 2025, COCs are collectively importing around one-third of national demand, leaving two-thirds to BOL.” The paper also highlights significant market distortions and what it describes as “parallel markets” across the fuel value chain. Under the current framework, IOCs are prohibited from importing fuel and must procure exclusively from BOL. They are also barred from purchasing from COCs, effectively eliminating their ability to negotiate prices in a competitive environment. At the same time, COCs continue to operate across sourcing, distribution, marketing and supply to retail and commercial customers, but are restricted from selling to IOCs. According to the paper, this has “stifled competition” and limited opportunities for pricing and supply innovation. With IOCs and COCs operating under different constraints, the market has effectively split into uneven segments, with conditions “tilted sharply in BOL’s favour.” The exclusion of IOCs from importation also prevents them from earning supply margins, unlike BOL and COCs, weakening their competitive position while they continue to bear storage-related costs. BOL, meanwhile, is partially compensated through the Security of Supply Margin (SSM). “It is clear that the various regulatory changes now in force in the fuel industry have resulted in a playing field that is far from level,” Jefferis said. “BOL is privileged across the value chain, COCs benefit to some extent, and IOCs have been placed in a position where they are restricted from participating and competing across most stages of the value chain, making the IOC business model unattractive.” This situation is compounded by decisions from some major commercial customers requiring fuel suppliers to be citizen-owned, further reducing the market available to IOCs. The paper says BOL is evolving into a vertically integrated monopoly, expanding from strategic storage into procurement, wholesale and potentially retail. It notes that BOL has submitted a bid to acquire Engen Botswana’s assets, despite previously stating it did not intend to enter the retail space. “BOL is now attempting to enter the retail space, despite claiming over many years in its annual reports that it is not a retailer,” the paper said. Contrary to the government’s stated objective of strengthening supply security, the paper argues that BOL’s dominance has created a single point of failure. With IOCs excluded from importation, supply nodes in South Africa have reportedly declined from five to one, leaving heavy reliance on Sasol Natref. This concentration has led to congestion at loading points, border posts and BOL’s storage facilities, increasing costs and reducing efficiency. “BOL’s dominant role has reduced the security and diversity of supply from South Africa,” the paper said. The report also points to operational challenges, including recurring supply shortages, loading bottlenecks, truck delays and BOL’s reported inability to consistently meet monthly fuel demand from oil marketing companies. “The IOCs, which are now dependent on BOL for supply, report that BOL is at times unable to supply the full volumes requested, undermining both security of supply and the IOC business model,” the paper said. Jefferis also highlights what he describes as a Citizen Economic Empowerment paradox. While BOL’s dominance is justified as a tool for citizen empowerment, the transport sector faces growing risks. Citizen-owned transporters report that BOL’s performance falls short of the previous IOC-led system, citing operational inefficiencies, safety concerns and short-term contracts that make it difficult to secure financing. “Due to BOL’s inefficiencies, the viability of the fuel transport business is questionable, and there is a high risk that several citizen transporters will exit the industry as they are unable to cover their costs,” the paper said. The paper further notes that BOL’s expansion into commercial contracts — including Debswana and the Central Transport Organisation — and its potential entry into retail place it in direct competition with citizen-owned companies the policy is intended to support. It says BOL has repositioned itself in the wholesale market, securing major contracts through policy decisions rather than competitive tendering, effectively excluding both COCs and IOCs from key public sector supply opportunities. Jefferis said the mandate has broader economic and policy implications. National Development Plan 12 emphasises reducing the role of state-owned enterprises to avoid crowding out the private sector, yet BOL’s expansion appears to run counter to this objective. The paper also raises fiscal concerns, noting that reduced IOC profitability and the loss of private sector margins could lower overall tax revenues, potentially offsetting any dividends generated by BOL. It further argues that policies have effectively discouraged foreign-owned firms by excluding them from key parts of the value chain, making their business models increasingly unviable and raising concerns about investor sentiment. At the same time, COCs have gained a pricing advantage, enabling them to increase market share, while the weakening position of IOCs is encouraging potential exits and acquisitions by local players. “The enforcement of a sizable import mandate for BOL is inconsistent with broader economic policy objectives relating to citizen empowerment, foreign direct investment and private sector development,” Jefferis said. He warned that removing IOCs from the market risks depriving Botswana of critical skills, technical expertise and supply access, while also potentially leading to job losses and reduced investor confidence. At a regulatory level, the paper highlights the marginalisation of key institutions. The Competition and Consumer Authority has played a limited role, while the Botswana Energy Regulatory Authority has been effectively overridden by ministerial powers introduced under the 2022 amendment. Although BERA had previously capped BOL’s import licence at 25%, citing concerns over market dominance, subsequent policy decisions have centralised control of import allocations. Jefferis challenges the key justifications for the mandate. He said there is no evidence that BOL can secure cheaper fuel than IOCs through economies of scale, and noted that regulated fuel prices limit the potential for cost savings to be passed on to consumers. He also questioned claims that BOL would significantly increase government revenue, noting that the company has only recently become modestly profitable and has yet to pay dividends. “The 90 percent import mandate is therefore unsustainable and should be removed,” the paper said.

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Report Exposes How Botswana Oil is distorting fuel market

As Vivo Energy Limited moves to sell the Engen Botswana assets it owns, Botswana Oil has reportedly submitted a bid, marking a potential entry into the country’s fuel retail market, writes BABOLOKI MEEKWANE.

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Report Exposes How Botswana Oil is distorting fuel market

As Vivo Energy Limited moves to sell the Engen Botswana assets it owns, Botswana Oil has reportedly submitted a bid, marking a potential entry into the country’s fuel retail market, writes BABOLOKI MEEKWANE.

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