File:Motorists jostling for fuel in Kitwe during the 2009 fuel shortage
File:Motorists jostling for fuel in Kitwe during the 2009 fuel shortage

WEEKLY POLICY ISSUE

Zambia’s fuel cost is among the highest in the region. In some instances Zambia’s fuel sells for over 3 Zambian kwacha above most countries in the region. This is because our feedstock into Indeni is expensive due to its structure and the high taxes Government imposes on it. Government taxes account for almost 40% of the fuel cost in Zambia. The simple action of reducing taxes and most importantly reducing the 25% tax charged on imported finished products can substantially reduce the cost of fuel to the consumer. The third dimension to the expensive fuel is infrastructure that is more than 30 years old. A little tinkering of Indeni could lend the plant more efficient and profitable to supply the public with cheap fuel.

Infrastructure, be it physical, technological, social sector or services is a bedrock of growth of any economy in the world. All successful economies are built of very reliable infrastructure. It is common knowledge that infrastructure generally in Zambia has continued to deteriorate, but of greatest concern at the moment is the energy sub sector of fuel. It is illogical that the price of crude oil has over the past five years been on average downwards. It was at its highest (above US$100 per barrel) between 2011 and 2012 but started easing off and fell below the US$100 mark in 2014. The downward trend has continued to date with marginal movement up and down, but all below US$75 per barrel. We are left to wonder why fuel costs at the pump in Zambia does not mirror trends or oil pricing on the international market.

The reasons are simple. Indeni, TAZAMA and the Ndola Fuel Terminal (NFT) are all, over 30 years old. The technology that is installed at Indeni is of the 70’s but is expected to produce oil products of the 21st century such as Low Sulphur Diesel (LSD). Indeni cannot process pure crude oil because it does not have the technology to do so. In order for Indeni to process crude, the crude has to be mixed with diesel and another product called Naphtha. What this implies is that Zambia has to import a finished product, diesel, at high cost, mix it with crude oil and then process it at Indeni to produce Heavy Fuel Oil (HFO), Light Fuel Oil (LFO), Diesel, yes diesel (again), Petrol, Kerosene and Jet A1. Indeni was designed to process 1.1 million metric tons of crude oil per year. It currently operates at much less capacity to the point where if it was let to compete with finished imported products, it would close. In order to protect Indeni, the PF Government has slapped a 25% tax on finished imported petroleum products which could be sold much cheaper if the Oil Marketing Companies are left to import. To illustrate this point, the importers of feedstock are charged 5% tax while the importer of a finished product are slapped with the 25%. Indeni in its current state is not profitable, this is the reason Total sold their 50% share back to Government.

Secondly, the entire crude oil procurement process is shrouded in secrecy. Tenders are awarded and cancelled and re-awarded to friends of the people in the PF Government. The Cost Plus Pricing Methodology (CPM) used by the Energy Regulation Board(ERB) last time we checked, has 12 cost components, half of which were costs related to middle men. All these costs associated with the middle men are calculated in the final price that the consumer pays. Why should the consumer pay the price for the middle man when that middle man can be cut out just by changing the fuel procurement processes? The PF is wasteful and is not interested in the reducing the cost of living for the Zambians but are only interested in enriching themselves and their friends at the expense of the Zambian citizen.

  1. A UPND government will address this issue of high fuel prices in this manner:-

    In the short term, we shall open the import market of finished products so that Oil Marketing Companies (OMCs) can import the finished commodities at a cheaper price for the benefit of the Zambians. This is what a responsible Government would do. But the PF will not do it because they need the 25% being charged on finished products because they have over borrowed and need to service the incurred debts.
  2. Support local businessmen that would like to participate in the construction of new refineries and strategic fuel reserve facilities to obtain affordable financing. This will provide a buffer against fluctuating crude oil prices on the international market as well as exchange rate volatility.
  3. Cut off the middle men in the oil procurement process. With strategic fuel reserves facilities, Zambia can afford to negotiate directly with Governments that supply oil so that we pass on the benefit of cheap crude oil to the consumers
  4. Indeni needs to be redesigned and the correct technology deployed. Indeni should have capability to process pure crude oil without cracking it by adding Diesel and Naphtha. Indeni is inefficient at the moment; its inefficiencies are being passed on to the consumer in the form of high fuel costs. The inefficiency coupled with that tax on the finished products charged by Government are making fuel expensive in Zambia. A credible investor cannot invest in Indeni because of the protectionist approach Government has taken.
  5. We will encourage research and investment in biofuels. Malawi is already doing it. Brazil can switch between fossil and biofuel when the crude oil prices go beyond a certain threshold.

It is an undeniable fact that fuel is one of the major costs in production. It is a known fact that Zambia continues being none competitive because of the high cost of production. A ton of sugar in Brazil is produced at one third the cost of producing the same ton in Zambia. The European Union will, in 2017, stop the aid for trade programme that saw Zambia Sugar export sugar into the Eurozone. How do we hope to compete with Brazil in supplying cheap sugar into Europe with such a disparity in production costs? This is the fundamental question that we need to answer as we implement these solutions starting in 2016 because I can assure you, PF will not do anything about our current state of affairs.

Hakainde Hichilema
UPND President

“Together we can”
___________________________
Issued by: UPND National Campaign Centre, Lusaka

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41 COMMENTS

  1. True that Mr. President!

    PF bandits kuyabebele in 2016, together with their found companions of MMD bandits.

    The Skeleton Key
    ~206~

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    • Zambians are interested in being cheated but cannot see reality in real sense. We need to open our eyes to see beyond our noses.

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    • Solutions you always ask for..there you are. HH has said what he would do. How can Zimbabwe and Malawi have cheaper fuel than us. HH has really raised the intellectual bar for addressing national issues.

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    • Great ideas, bad forum! 99.9% of people on here are disenfranchised. You can’t win elections based on support you get online. I thought he learned this from all the projections he got from MUVI, FB and Watchdog only to lose.

      Since am The Real Olivia Pope, here is free advice for you; HH is clearly not likeable. He comes off as aloof compared the Chilubas, Satas and Lungus of this world.It doesn’t matter how many times he visits the compounds people just see him as detached. He can fix this by bringing out his wife and kids more often. Let the people see the woman and family behind the man. It will humanize him. Then and only then can he talk about issues. Otherwise he will continue losing!

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    • You know what, HH is scaring me now,…… how can a kachema have so much amano? King David was a kachema. By far the best WEEKLY POLICY ISSUE i have ever heard from him. Not over promising, but just stating that its possible to reduce the price of fuel. Thats enough for me to reassure my support for this man. I hope you do as you say boss. God bless, have a good week.

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    • @Kandolo chi colour this is more important and beneficial to Zambia and you bring in senseless rhetoric barkings. Whether this guy stole, he has reinvested all all that he had stollen in Zambia and created employment for your suffering relatives. He is a positive thinker unlike the Mwadya Mweka Daddy (MMD) thieves and those stealing now. Think using your head and spare your backside.

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  2. Those are just theories which even sata when he was in opposition talked about. What if claims are the solutions are actually fantasies. My advice to you is to concentrate on how to be in govt at any level and learn how things are done. What you have pointed out as solutions don’t even come close to reality.

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    • STOP BEING BITTER ABOUT THE MAN HH OFFERING SOLUTIONS YOUR GOVT OF CHAGWA HAS FAILED COMPLETELY.THE MAN CHAGWA IS NOT DOING ANYTHING APART FROM SWORING HIS FELLOW CARDERS.

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    • @ sponge bob, we both are resident in the land of opportunities where people never say never and live with a positive attitude that turn ideas from ugly to beautiful. See how self defeatist you are with your very last sentence.

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  3. HH for president..you see what a fine brain can bring out.. no wonder he is a success businessman. go HH go UPND

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  4. Zambia is broke, the little cash manee we have is spent on campaigns for elections directly or indirectly by GRZ and other parties.
    That is all they do, campaigns. when they are not campaigning they are engaged in corruption, if a project is being implemented it is substandard at inflated prices by their own companies. Like when Lung was chawama MP, he oversaw some drainage works that were not lined with concrete, the result–roads were eroded and collapsing and ponds were being formed.

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  5. @Kondolo! You are a d0g! Look beyond your stinking mouth! And another illiterate cadre was saying these are just theories. No wonder you will continue wallowing in poverty over packs of shake shake and few pieces of silver, meanwhile your family is in real poverty you f00l! Ati ifintu ni Lungu!

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  6. Yes atleast u hav pointed out the prblmz and u hav given solutions.but u lost it at last when u started attackin ur friends by sayin they r corrupt.for that mr hh I giv 7 out of 10 when u kud hav easily taken 10/10

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  7. I have always believed and iam still convinced that HH means well for Zambia.Its up to you Zambians who are tribal to the bone that your eyes have been blinded.Come 2016 HH you still have my vote.

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    • Zambians are generally not tribal but the few selfish ones who peddle lies misinforming the gullible public to the detriment of alleviating poor living. We elect people who once they have a taste of power grow wings and start hating the very people who accorded them the privilege to be of service to the motherland.

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  8. The problem with this so-called brilliant article is in the absolute claim to make fuel cheap. If he had said it is possible for fuel to be cheaper than it is now, I would have believed. May be it is a problem of thinking in Tonga and writing in English. The problem with HH is to think the infrastructure at Indeni can be overhauled overnight and research and development in bio-fuels can be carried out in a day, as if he knows where the money is. He should have told us about where he will find the money for us to believe him. If you have never worked before in government you think government sits on loads of money! HH does not also tell us about the limitations of any investment in bio-fuels that energy experts are alive to. To those with uncritical minds it is simply doable.

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    • Well noted and well spoken,this is one observation most people on this platform have not observed,most of them are blindly praising.

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  9. Well said HH. Only *****s cannot appreciate what HH is saying. There is nowhere this country is going.

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  10. If in big economies like South Africa retail price of petrol hiked by 3.6 percent while wholesale diesel went up by 4.4 percent meaning petrol now cost about 13.36 rand while diesel is costing about 11.67 rand. SADC giant fuel producer, Angola, has not been spared as local fuel price was hiked by 30%. Just recently Malaysia introduced 6% GST on all goods and services, meaning fuel inclusive has raised by 6%. Here comes HH proposing reduction on the 25% tax charged on imported finished products claiming it can substantially reduce the cost of fuel to the consumer. Guys lets look beyond Zambia, this is mere politicking….industrialization as president Lungu explains it is the only way to go. Short cuts will land us into more more problems, lets talk of industrialisation

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    • I fail to understand HHs economics. How is he going to run the country without taxes at the same time without borrowing as well? All I know is all the big economies in the world have taxes and they do borrow.

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  11. HH do not mislead us please. He says the infrstructure has deteriorated. The truth he does not say is that PF has or is addressing this very well. See how things are becoming better.

    IDENI and NC for example are back to life.

    HH and UPND have nothing new to give Zambia. Everything they say they will do is already being done by EL and PF.

    This is problem HH finds himself in. How to be innovative enough to bring new vision. Actually, HH should stop this nonsense and applaud PF for doing a good job.

    You will now understand why he is always stealing information. The guy has completely run out of ideas. Do not waste our time with a to=list that is already beung done by EL and PF.

    PF show these confused fellas how it is done!!! HH the Pilato is a shame.

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  12. I would have listened to this as holy truth if it was not coming from someone who benefited so much on privatization of public companies. I will pose a few questions. How dull was Kaunda to build the pipeline from Tanzania to Zambia? Did the PF government build Indeni?
    This HH boy is preying on people’s ignorance. Also haven’t the Zambian head enough promises that have not been fulfilled after voting? My advice to Zambians, work hard and do not be gullible to these selfish politicians whose interest are to enrich themselves. The same HH is busy grabbing land from the very Tongas who votes for him. What more can he do if the whole country vote for him. Do not trust a person who is not even a Christian.

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  13. Alternative leadership at it’s best. At times we should give credit where its due, our political affilliations notwithstanding. What other checks and balances are HH expected to keep if we keep condemning him grossly without testing how practical his ideas are? Lets be realistic.

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    • He is a fake. How is he going to develop the country without taxes and borrowing funds. Which country has develop without aid. Even developed nations still borrow.

      Remember HH was a plagiarist at UNZA so his economics degree is not genuine that is why it is very easy to punch holes in what he writes. If someone is helping write, they are dull. He needs to do better. he should fire all his helpers because they are not doing a good job.

      What he say he will do is already being done by PF. What a pity.

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    • @ Yebo Nkhosi, where does HH suggest abolishing taxes? Borrowing has to be “responsible borrowing.” On aid, I suggest you read “Dead Aid” and you will understand that no amount of Aid will develop a country.

      Well and good if PF is already doing what HH is suggesting, I can’t speak for others but I am yet to be convinced that they are thus I am awaiting results.

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    • But it is your HH who was using the notion of aid to sell our companies during the SAP times. What has changed now. He was championing that system and benefited hugely from. Hypocrisy again. We do not easily forget. Remember Anglo-American and HH were dancing together.

      Instead of aid you can call it loans. Which country has no loan to support projects? I have read a good number of books on the subject and I know what they mean. They do not necessarily mean that get a loan is bad.

      Where HH will get all the money when we only depending on copper. Will HH only through some stick on the ground and “boom” everything goes glittery. And he calls himself an economist? He is a very shameless, unrealistic big liar.

      Goodnite.

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  14. @Yebo Nkhosi you must be a very dull chap! If you are chewing with Edgar better you chew quietly than exposing your shallow mindedness on this forum! There is no way a sensible person can compare the crooked drunkard to HH in terms of everything! The cost of living has gone up, there is wage and employment freeze, most Govt projects have stalled and you in your wildest dreams you think the economy has picked up because of what you are dubiously benefiting from the useless illiterate PF cadres!

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    • Musonda Bweupe, you have got it wrong. Iam not dull but well educated. You do not exactly know me so you cannot assume. PF is doing better. Yes some project may have stalled but stopped. Many are smoothly running.

      There is no perfect system as you want to portray things will be under HH. That is utopia. No systems is perfect. I refuse to be cheated by clear lies of your HH and UPND.

      There is no scientific proof that all people who drink are senseless. There is no proof that only HH in Zambia is intelligent. I find him to be a very dull politician myself despite his success in business. Part of this success was through getting our money from proceeds of privatisation during SAP period.

      Politically, EL is more formidable than you HH. HH’s strength is based on region. EL is…

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    • The other thing Musonda is that I am only an ordinary citizen partcipating in a poltical discussion just like anyone else. It does not mean that I benefit from what Iam doing. Iam only defending my conscious and what I believe in. There is nothing wrong with doing this just there is nothing wrong with you doing the same.

      If your supper rich small god is giving you part of his wealth to write on this page? If he does please give me some. You say he is very generous. I find him to the most stingy, selfish and untrustworthy leader Zambia has ever had.

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  15. . By the way Nigeria & Angola who are major exporters of oil in Africa do not yet have a refinery because of high cost, why should Zambia have one ?

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  16. The pump price of fuel in Zimbabwe is actually USA D1.43. And in RSA R13.52. Where is it cheap ba hh. When this govt borrowed money to repair the Kariba dam imwe ba bwana. You where talking big negatively, Indeni goes on periodical plant shutdowns to improve on the same issues u talking about,its not news these issues have been with us for a long time, PF found them and they are addressing them. NCZ will shortly start producing Urea, Nyiombo will ve no choice but buy locally of course from ncz. Privatilisation is gone look to new sources baba. By the way ncz gave a 2000k salary increament across the board to its workers, kafue town is now back on its feet PF govt at work

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  17. On point #4 – what is UPND saying it is going to DO? Stating needs is not an action or a policy. Are you going to redesign the refinery or just say it should be redesigned?

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  18. Can HH do no better than stating the obvious and claiming he can do better? There is more to politics, as he should be starting to realize after the long string of defeats

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  19. Just to go back, I remember at one time Sata once spoke of buying crude oil direct from Angola when he was in opposition and the reaction from the minister in MMD by thensaid Indeni has no capacity to purifier the crude oil for its too thick. All what Sata said was get a loan and upgrade the plant to purifier it. So there’s nothing new HH is telling us about Indeni he has just taken advantage of Sata’s death for had he being alive he would have answered him.

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