Friday, January 3, 2014

The fuel shell game

About a couple of months ago, I was requested by a reader to look into the fuel sector; more specifically, the rising pump price of fuel and its impact on development. Fuel is, of course, what drives the engine that drives the economy.  If it is unavailable or too expensive for users, the train comes to a complete halt.

After attempts at getting some information on fuel import figures and pricing structures under the current procurement arrangement, I hit a brick wall which did not come as a surprise.  I have known for sometime that this sector is shrouded in secrecy for reasons known to Jammeh, a couple of his foreign business partners, and restricted number of Customs officials.

In the past, foreign oil companies operating in The Gambia (Shell, BP, Elf ) took turns in importing petrol, gas oil and kerosene.  The system worked well when foreign exchange was available.  Those who were around, remembered pre-Economic Recovery Program when foreign exchange was scarce, and the ensuing long lines at the petrol pumps. However, after the ERP, foreign exchange shortages became a thing of the past.  The fuel procurement system put in place served Gambia reasonably well.

However, after 1994, it appeared that everything that worked in the First Republic was a target for destruction by a group of soldiers who were more interested in raiding the Treasury than making things better for Gambians, as they promised when they seized power illegally.  Government procurement system was one of the first targets of the junta.  First, by meddling with the Major Tenders Board of the Ministry of Finance and then taking it over completely.  To help ease the foreign exchange pressures of government, the European Union initiated a Fuel Grant balance of payment support program whereby they will pay for our fuel import requirements through public tender, and proceeds from the sale will go  towards the financing of EU projects locally.  Apart from the usual complaints from, and bickering among bid losers, the program went extremely well with no major hitches and certainly no scandal of any sort, at least, not while I was in charge of the program 1989 - 1992.

Now, the Major Tender Board is barely functional since all government procurement is doing by Yaya Jammeh, including all fuel purchases that involves public finances.  Even private sector procurement is limited to a single private supplier, selected by Jammeh which makes access to information extremely difficult.   In short, and like everything else in Yaya Jammeh's Gambia, fuel procurement has been centralized and importation limited by government fiat.  Shell and Elton take their supplies from Jammeh's cronies.  When there is severe shortage, Elton might be allowed to scrounge around Senegal for supplies.

As we speak, there's petrol shortage in The Gambia caused by lack of foreign exchange, and also because of the monopoly created by Jammeh primarily to benefit his family members and business associates thus preventing other players from importing fuel.  The shortages and other interruptions in the system, will be further complicated by the International Monetary Fund's program with the government which calls for the gradual elimination of the fuel subsidy which would mean higher fuel prices.

The Jammeh regime has decided that they will eliminate the subsidizes gradually, over time which explains why there's periodic increases in prices throughout 2013 - a scenario that will repeat itself in 2014 until the subsidies have been completely eliminated.  Fuel price in 2014 is expected to rise another 15 - 20% further dampening any economic recovery efforts which will only add to the growing discontent and unpopularity of Yaya Jammeh and his regime.