Frazer Potani, AfricaNews reporter in Lilongwe, Malawi
On Tuesday February 1 this year, Cleopatra Mwaluwafu, 33, a Customer Relations Manager for a bank in Lilongwe woke up from her bedroom at Area 47 in Lilongwe, and after breakfast got into her sky blue Toyota Carina saloon car. But as she drove to her office, she suddenly noted a red light on her car's dashboard, a sign of low fuel in the tank.
She pulled the car near a pump at a nearest filling station and a male attendant got a key from her, opened the tank cover, and inserted the pump’s nozzle.
Mwaluwafu pulled out four K500 bank notes (K2,000 or $13) from her blue purse and passed them to the attendant who filled 6.89 litres in her car’s tank at K290.00 per litre before pulling out the nozzle and replacing the tank cover and handing over the key to the customer.
The litres that were filled in Cleopatra’s car were but about a litre less because before the recent fuel price hike one would buy 7.8 litres at a price of K256.20 per litre with the same K2, 000.
Around the same time armed with K5,000, Justina Chisi entered a Supermarket in Mzuzu City in the northern region of Malawi on a shopping spree and her purchasing power manages to buy some commodities less than she had bought just few days ago before the fuel price hike.
The Supermarket’s owners had no choice but to adjust the price tags upwards on the basis that transport costs for the products had also gone up as a result of the increased fuel prices.
In Malawi’s sole commercial city of Blantyre in the south, Bright Chauluka a Sales Clerk working for a confectionary products manufacturing firm in Limbe boarded a minibus and was told by a conductor to dig a bit deeper in his pocket as the fares had also been hiked by 10 percent following the same recent fuel price hike.
Inflation
The Malawi Energy Regulatory Authority (Mera) announced new prices of fuel with effect from January 28 this year, a move which economic commentators in the country say is likely to increase inflation.
The new prices per litre show that petrol has gone up from K256.20 to K290 representing a 13.19 percent increase while diesel has risen up from K231.20 to K260 giving a 12.46 percent increase.
Paraffin on the other hand has been hiked from K145.40 to K155 per litre representing 6.60 percent increase.
To come up with the new fuel prices Mera first held its 11th Board meeting on Friday, December 31, 2010 to consider recent trends in the world petroleum products prices and other macroeconomic fundamentals.
The Authority then noted the higher prices for petroleum products on the international market due to the gradual global economic recovery from the recession and increased demand for petroleum products.
“The Authority therefore, at its 11th Board meeting resolved to adjust pump prices of petrol, diesel and paraffin…. effective 28th January 2011,” a statement from Mera dated 27 January 2011 reads.
Mera says since the last pump price revision of 13th February 2010 FOB (Free On Board) prices for the three regulated petroleum products of petrol, diesel and paraffin have increased from US$685.004, US$606.089, and US$632.929 to US$824.98, US$767.03 and US$810.25 per metric tonne, respectively.
The authority says the FOB prices noted in December 2010 represent 20.43 percent, 26.55 percent and 28.02 percent increases on the three products.
It also says that in the 2009/2010 Malawi Fiscal Year the Price Stabilization Fund (PSF) was able to cushion the pump prices up to August last year.
Fluctuations
However, according to the statement bearing Mera’s Senior Consumer and Public Relations Officer Edward Mponda since September, 2010 the PSF has no longer been able to fully cushion fluctuations in pump prices in Malawi.
“In order to cover the costs of importation for petroleum products the Board resolved to increase petroleum products pump price,” said Mponda in part in the statement.
But Mera was quick to caution goods and service providers against unnecessary price hike of commodities due to the recent fuel price increase.
“It is the general view of the Authority that these fuel price increases will not affect prices of goods and services unrealistically,” Mera says.
One of Malawi’s economic think tanks Charles Mataya however, said it was impossible for services and products prices to remain constant when fuel prices were hiked.
“An analysis shows that hiked fuel prices drive prices of goods including food and other services up and in turn even send inflation figures up,” he said.
Minibus Owners Association of Malawi (Moam) secretary general Coxly Kamange agreed with Mataya.
“We have raised minibus fares by 10 percent to remain in business because we can’t charge the same old low fares when the price of fuel has gone up,” he said.
Civil Servants Trade Union (CSTU) president Elia Kamphinda Banda whose body represents interests of all government workers in Malawi said experience clearly shows that whenever fuel prices are hiked consumer’s purchasing power is reduced.
“When fuel prices go up goods and services’ price tags cannot remain the same. After all fuel price hikes do trigger a corresponding commodity and service price increase,” said Banda.
Salary raise
To emphasize his point Banda gave an example of the 2008 fuel price hike which coincidentally came soon after Malawi Government had raised government employees’ salaries by 20 percent. He said the pay increase was eroded by the fuel price hike.
“That time the fuel price was hiked by 25 percent and put us in a very bad situation as it made us even poorer than before,” said Banda.
The recent fuel price hike comes just after Malawi has been rocked by recurrent forex and fuel shortages whose reasons according to Malawi Government are numerous.
On forex shortage Malawi’s President Bingu wa Mutharika blames some Asian business community of siphoning foreign currency from Malawi for banking abroad for reasons best known to them.
While Information and Civic Education Minister in the cabinet, Symon Vuwa Kaunda said fuel was not available in Malawi due to renovations of a bridge at Tete in Mozambique.
But Vuwa’s statement was dismissed by President Armando Emilio Guebouza’s Government in Maputo through Mozambique’s envoy to Malawi, Pedro Davane.
Davane charged that any reference of Mozambique should be made while keeping in mind that it is a country of 20 million people and an elected government that has feelings and sensitivities.
“And I must say here that our feelings are hurt,” he said as quoted in Sunday Times (Malawi) of September 26, 2010.
Malawi’s Foreign Affairs Minister Steven Kamwendo on the other hand said the fuel shortage was due to congestion at the port of Beira in Mozambique.
He said he was not trying to contradict anybody on the matter, “But information we have is that there is congestion at the port of Beira which is delaying our fuel there.”
Other unconfirmed reports however, alleged that Malawi Government failed to pay its debts to petroleum suppliers and then sourcing for new suppliers.
Following failure to pay debts, the suppliers withdrew from Malawi.
Energy and Natural Resources Minister Grain Malunga on the other hand attributed the fuel shortage to a number of factors including oil companies’ failure to maintain fuel stocks measured in days cover in Malawi.
“The fuel supply situation in the country has in recent months been generally unsatisfactory, with notable intermittent fuel dry-outs in some filling stations,” said Malunga.
He added that Malawi Government has both drawn short and long term plans to deal with the fuel scarcity problem including construction of an oil supply pipeline from Mozambique into Malawi.
But Consumers Association of Malawi (Cama) executive director John Kapito said both fuel scarcity and price hike were like a double edged sharp sword cutting off Malawian consumers’ purchasing power.
He said while fuel scarcity has been creating challenges to consumers as a result of price increases in the commodity mostly sold on the black market, price hike also triggers goods and services prices to go up.
“…and taking advantage of both fuel scarcity and fuel price hike goods and services providers adjust prices forcing the consumer to dig deeper in the pocket,” added Kapito.
On Tuesday February 1 this year, Cleopatra Mwaluwafu, 33, a Customer Relations Manager for a bank in Lilongwe woke up from her bedroom at Area 47 in Lilongwe, and after breakfast got into her sky blue Toyota Carina saloon car. But as she drove to her office, she suddenly noted a red light on her car's dashboard, a sign of low fuel in the tank.
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