In Zambia, the cost of transport has risen by 25% and the public is in disarray and economically vulnerable, as the International Monetary Fund’s clueless policy ignores the poor.
The cost of the increase is due to cut in fuel subsidies by the government. The move which is believed to be a part of the government’s attempts to reduce its ballooning budget deficit as well as basis for the country to be eligible for a bailout from the International Monetary Fund (IMF).
The rising fuel prices are making life increasingly difficult for most Zambians and the small businesses that many of them owe and operate. The degree of hardship felt by Zambian today due to fuel shortages was first reported Tom Maxwell, Adjunct Professor, School of Education, University of New England.
In today’s African economies, petrol is an essential and key driving force behind economic development and productivity. Personal and industrial consumption generate dependency within entire economies, which can create volatility in both supply and price. Demand, however, remains constant as there is no sufficient substitute to a commodity so deeply imbedded in several sectors across the economy.
Zambia, unfortunately, is not excluded from the list of oil dependent economies. In December 2014, just before the presidential election, the Zambian government declared a reduction in the selling price of fuel. Oil retailers are now anticipating future price increases back to normal levels and are hoarding supplies. Thus, a countrywide fuel shortage occurred, causing widespread panic amongst personal and industrial consumers. Productivity delays, long fuel queues, angry motorists, and traffic build-ups had become the norm across Zambia.
Zambia has one oil refinery, Indeni Oil Refinery. Founded in 1973 and based in Ndola, it was designed to refine 22,000 barrels per day of petroleum products, but production has declined to 17,000 barrels per day. The Indeni Oil Refinery is a basic topping refinery that requires additional processing in Tanzania before piping raw crude to Zambia, which then supplies petroleum products to copper mines and filling stations. The presence of one oil refinery raises a key question: Could a second oil refinery in Zambia curb the fuel shortages and ensuing slowdown of economic activity?
Maysen & Borowski believes so, and is implementing a project to build that second oil refinery (Bwana Mukubwa Oil Refinery and Pipeline) in Zambia. The project includes the development of supporting infrastructure and industries such as commercial developments, warehousing, a dry port, skills and training facilities, residential development and green space. Outputs from the refinery will be fit for use for both industrial and commercial purposes. The refinery is expected to triple current national crude oil supply and will include new exporting lines to the Democratic Republic of Congo and Tanzania.
Once the entire project is completed, the refinery will process up to 100,000 barrels per day. It will introduce several economic and social benefits, such as an estimated 18,000 employment opportunities and an injection of upwards $500 million into the Zambian economy. A fiber optic communications cable will also be installed along the pipeline from Dar es Salaam to Zambia, providing Zambia a direct link to deep-sea fiber optic backbone. These direct gains and connectivity will have a multiplier effect in many sectors across the country.
Maysen & Borowski will raise $3.3 billion in foreign direct investment to build a second refinery in Zambia and provide a critical piece of infrastructure. The Bwana Mukubwa Oil Refinery and Pipeline will go a long way in curbing future fuel shortages like the one Lusaka recently experienced.
Tom Maxwell is a Adjunct Professor, School of Education, University of New England