Home | News | OIL COMPANIES TO FUND GOVERNMENT’S FUEL COMPANY

OIL COMPANIES TO FUND GOVERNMENT’S FUEL COMPANY

14/02/2021 00:34:00 BY WELCOME DLAMINI

Font size:

MBABANE – The private sector will shoulder the financial sustainability of a newly-formed government oil company to be known as the Eswatini National Petroleum Company (ENPC).

In that regard, government has alerted private oil industry players that from next month they have to start contributing a fuel levy of 35 cents per litre that will go towards financing the operations of the ENPC, which is a Category A public enterprise.

The players that will fund the ENPC include Total Swaziland, Puma Swaziland, Galp Swaziland, Swazi Oil, Phakama Oil, Tholo Oil, Kosotape Eswatini, Fuelex and the South African Petroleum Industry Association (SAIPA).

This is the second Category A public enterprise that will depend entirely on funding from these private oil companies.

The other is the Sincephetelo Motor Vehicle Accident Fund (SMVAF), which is also funded through a fuel levy of 35 cents per litre – an amount that has been fixed at this rate since 2011.

reflective

SMVAF is now seeking that this levy should be increased because it is no longer realistically reflective of a significantly changed operational and economic environment.

In its financials for the year ended March 31, 2020, SMVAF disclosed that should the levy remain unchanged, it is feared that the fund could be insolvent by mid-2023.

Looking at the income generated by SMVAF through the 35 cents per litre paid by these oil industry players, the ENPC will also receive in excess of E100 million a year.

For the 2020 financial year, SMVAF received E121 million and, for the year 2019, it received E114 million.

The Times SUNDAY has seen a letter from the Ministry of Natural Resources and Energy’s Principal Secretary, Dorcas Dlamini, informing the Oil Industry Secretary, Bongani Zwane, of the private companies’ obligations.

“The ministry kindly informs the Oil Industry that oil companies will be required to pay a fuel levy of 35c/l to the Eswatini National Petroleum Company (ENPC) as per Clause 33 (1b) of the Petroleum Act No. 18, 2020 Gazette No. 183 of 2020. The above mentioned levy, to be recorded as ENPC levy in the slate, will be introduced to the fuel price structure with effect from the 1st of February, 2021,” reads part of the letter that is dated February 8, 2021.

The Act, which was assented to by His Majesty King Mswati III on December 18, 2020, has repealed four other legislations, namely: the Fuel Oil Levy Act of 1980; the Control of Suppliers Order of 1973; the Disposal and Use of Petrol Regulations of 1974; and the Petrol Regulations of 1941.

Clause 33 (1b) of the new Act is one of five ways through which the ENPC may derive revenue.

The other four include: such sums as may be appropriated by Parliament from time to time; storage fees for strategic stocks for the country; storage fees of fuel for other oil companies and the sale of fuel; and any other funds that may be mobilised and whose acceptance is approved in writing by the minister.

plan

In Clause 33(2), it is provided that the minister may, in receipt of the ENPC’s strategic plan, business plan and budget, by notice put in place a levy on petroleum products for the funding of the said company’s strategic plan, business plan and budget.

The letter to the oil companies continues: “As such, oil companies will be required to remit the ENPC levy to the Eswatini National Petroleum Company by the 14th day of every month, based on the preceding month’s sales volumes for petrol and diesel.”

The payment, according to the letter, should be in line with provisions 69 and 70 of the Petroleum Act.

Provision 69 – method of collection and payment of the levy - states that every wholesaler shall (a) upon the sale or import of any petroleum product which is liable to a levy, record the amount sold or imported and the levy payable thereupon; (b) not later than fourteen (14) days after the end of each month remit the record as referred in paragraph (a) above the total amount of the key payable on the petroleum product sold during the preceding month; and (c) every wholesaler shall maintain a record, in a prescribed form which shall be open for inspection and examination by an authorised officer.

Provision 70 – interest on unpaid levy – states that any wholesaler who fails to pay the levy as prescribed in Section 69(b) shall be liable to pay interest on the amount of any payment or part not made on the due date, calculated at the rate of the prevailing prime lending rate as set by the Central Bank of Eswatini and any such amount together with the interest which shall be treated as a debt to the fund (Strategic Oil Reserve Fund).

The letter from the principal secretary adds: “Hence the first payment will be for volumes sold in the month of February, 2021 and should be made to the company by the 14th March, 2021. Oil companies are requested to submit to the company their fuel volumes together with proof of payment by the 14th day of every month, as per the attached schedule.”

The oil companies have been provided with the banking details of the ENPC, which has its account held by Nedbank Swaziland.

Eswatini Fuel Retailers Association Chairman Mduduzi Nyawo said he had not yet received the letter from the principal secretary and would, therefore, not be able to comment on it.

“Until they formally communicate with me as well, I am unaware of anything,” he said.

condition

A fuel retailer, who spoke on condition of anonymity, said the 35 cents was outside the cost price of fuel and wondered if consumers had been consulted on this because the retailers would pass the levy onto them.

The retailer also raised concern that the oil industry was made aware of the need to pay the 36/litre levy a couple of days after government announced 70 cents increase in the price of fuel. “Why was the 35 cents not included in the recent increase?” he wondered. Sikelela Khoza, the Communications Officer in the Ministry of Natural Resources and Energy, said the levy was introduced to the fuel price methodology on February 1, 2021 in line with the commencement of the Petrol Act.

He said as such, the levy had no influence on the recent fuel price increase, which was effected on February 4, 2021.

“The recent fuel price increase was informed by oil markets and Lilangeni/Dollar exchange rate as per assessment as at end of January 2021, just as prices increased in the Republic of South Africa, which were informed by market fluctuations,” Khoza said.

He went on: “There will be no fuel price increase as a result of the introduction of the 35c/l as this will be managed through the fuel pricing formula/slate mechanism, hence this will not burden the consumer.”

He added that all stakeholders were consulted during the development of the Act in accordance with the country’s consultation procedures for development of legislation. “The 35c/l Eswatini National Petroleum Company levy is mandated by the Petroleum Act, 2020 and is for the operations and infrastructure development by the Eswatini National Oil Company,” Khoza said.

Chairperson of the portfolio committee on natural resources and energy MP Big Boy Mamba said oil companies were invited to come and make their contributions when the Petroleum Act was being crafted and, therefore, they were involved in the development of the 35 cents per litre levy.

development

“The oil companies have always been aware of the levy and they agreed to it as they were part of the development of the Petroleum Act. Even though these companies will be competing against the new government oil company, they will benefit from its existence because they will be allowed to store their fuel at the Strategic Oil Reserve Facility that will be under this government company,” the Ngudzeni Member of Parliament said.

The MP suggested that the oil companies and consumers will benefit because the 35 cents is aimed at sustaining the supply of fuel in the country without experiencing shortages, including ensuring that rural communities do not have to drive long distances before getting fuel because more outlets would be established.

“The oil levy will also provide self-sustenance to the national oil company without government subvention, which sometimes comes in short supply,” Mamba said.

The legislator said as far as parliamentarians know, it was not entirely correct that the ENPC will be competing with the private oil companies.

He said consumers should also not lose any sleep over the 35 cents per litre levy because it will not result in an increase in the price of fuel.

“The Ministry of Natural Resources and Energy has its measures of controlling the fuel price to protect consumers so the same will apply even now that the fuel levy has been introduced,” Mamba said.

As spelled out in the Act, the objectives of the ENPC are: to secure, market, trade in crude oil and petroleum products; to carry out the business of supplying and distributing petroleum and petroleum products into and from the Kingdom of Eswatini; to carry on the business of importing and exporting petroleum and petroleum products into and from the Kingdom of Eswatini; to identify, build, own, manage crude oil and petroleum logistics investments including storage and handling terminals; to carry out network surveys to determine key national development areas for the development of retail stations in key national development areas; and to issue rural area retail licences in key national development areas.

production

Other objectives include: to identify, build, own and manage hydrocarbon terminals; to carry out the blending of fuel for the production of bio-fuels such as the blending of Unleaded Petrol with ethanol; to appropriate any parts of the property of the company for the purpose of, and to build or let, shops, offices and other places of business and to use or lease any part of the property of the company not required for the purposes aforesaid for any purpose for which it may be conveniently used or let; and to empower local companies through partnerships and joint ventures with indigenous emaSwati as may be prescribed in regulations.

Additionally, the national company will do all or any of these objectives in any part of the world and either as principals or agents and either alone or in conjunction with others; and to do any business that may be necessary and incidental to the attainment of the above-mentioned objects.