SUBSIDY COSTS OVER 300,000 DOLLARS A DAY

The Mozambican government’s current fuel subsidy policy is costing “between 300,000 and 500,000 US dollars a day”, according to a source in the Mozambican Association of Fuel Companies (AMEPETROL).“Has anyone ever thought what the result would be if all these subsidies were invested in health, education and other priority areas?”, the AMEPETROL source added.He was speaking to AIM about the letter which AMEPETROL sent to Prime Minister Carlos Agostinho do Rosario last week calling for an end to the subsidy system.Currently, the government fixes fuel prices, at a level lower than the world market price of petrol or diesel. The government is supposed to pay the difference to the fuel distribution companies. But it does not pay the subsidy promptly, and AMEPETROL says the government currently owes the companies around 70 million dollars. That sum is rising by between seven and ten million dollars a month.

AMEPETROL suggests returning to the old system of monthly reviews of fuel prices, based on the world market price of refined fuels and the exchange rate of the Mozambican currency, the metical, against the dollar. Under that system, jettisoned several years ago, any variation in market prices or the exchange rate in excess of three per cent, in either direction, would automatically trigger adjustment of the prices paid by the public.“Fundamentally what is happening with the fuel companies is the same as buying something for ten meticais and selling it for five”, exclaimed the AMEPETROL source.Fuel is cheaper in Mozambique than in all the neighbouring countries. A litre of petrol at a Mozambican filling station costs 50.02 meticais (about 74 US cents). AMEPETROL says in South Africa, the price is the equivalent of 73.6 meticais, in Tanzania 61.45 meticais, in Malawi 80.03 meticais, in Zambia 90.04 meticais, and in Zimbabwe 97.9 meticais.This is a powerful incentive for motorists in neighbouring countries to drive over the border and fill their tanks in Mozambique. The situation is particular blatant in Manica province, where tanker trucks from Zimbabwe buy fuel and then export it illegally to resell it, at much higher prices, in Zimbabwe.

South African trucks also find it very convenient to refuel in Mozambique. “Every day we see large, long distance trucks entering Mozambique from South Africa along the N4 motorway”, said the AMEPETROL source, “If each of those trucks buys 600 litres in Mozambique, that amount, multiplied by 1,200 trucks a day, is an enormous burden for the Mozambican economy”.He noted that, even if the government were to increase the petrol price by 20 per cent, raising it to 60 meticais a litre, it would still be the cheapest petrol in the southern African region. This is true despite the recent appreciation in the value of the metical against the dollar, since the revaluation of the metical is lower than the rises in recent weeks in international fuel prices.AMEPETROL insists that it is urgent to end the subsidy system, since there is a risk that, if the government is unable to honour its commitments to the distribution companies, they will be unable to honour their commitments to the suppliers, and the country could be at a real risk of running out of fuel.