26 March 2019

Namibia: Govt Entities Cash in On Fuel Hikes

MOTORISTS and other fuel consumers have paid more than N$6,4 billion in taxes to government agencies over the past three years.

Statistics seen by The Namibian show that 27% of the fuel costs are not directly related to fuel in the tank, but instead go to state agencies through road user charges and the government's mandatory accidents insurance.

Around N$4,91 of the current petrol pump price of N$12,95 is paid to the Motor Vehicle Accident (MVA) Fund, the Road Fund Administration (RFA), National Energy Fund (NEF) and the finance ministry in taxes and levies.

The NEF is the agency paying for the controversial fuel storage facility at Walvis Bay, costing about N$7 billion. The above-mentioned agencies benefit every time the fuel price is increased. The cost of fuel has increased seven times since May 2018, dropping in December last year, before stabilising in 2019.

The cost of fuel gets higher the further the distance from Namibia's main seaport. The current pump prices for petrol at Walvis Bay are N$12,95 a litre, diesel 500 (N$14,08) and diesel 50 (N$14,13).

According to the fuel formula from the energy ministry, out of the N$12,95 petrol price, N$1,30 goes to the RFA, 50,3 cents go to the MVA, 98 cents are paid to the NEF, while 65 cents are paid to the finance ministry as road user charges or fuel tax.

The government's share of the fuel pump price is N$3,47 per litre on petrol and diesel, while around N$7 goes to oil companies.

The MVA Fund, a state agency which administers the government's mandatory accident insurance scheme, received N$1,66 billion from fuel charges from 2016 to 2018. The fund has been criticised for having a top-heavy management structure that is highly paid.

The MVA Fund's acting chief executive officer, Lukas Ndjamba, yesterday told The Namibian that the fuel levy income received over the past three years was spent as follows: 62% went to pay claims, 19% went to employment costs, 11% to investments and 8% to operating costs.

The RFA, the government agency which manages the road funds system, received more than N$4 billion over three years.

According to the RFA's financial reports for 2017/18, the fund received around N$1,4 billion from fuel sold, which contributed 60% to the fund's total income.

In financial year 2015/2016, the RFA received around N$1,3 billion from fuel sold, an increase of 18%, compared to the previous financial year.

The increase was due to a rise in volumes of fuel sold and a 10% increase in tariffs, the financials showed.

Finance minister Calle Schlettwein said in his 2018 budget statement that the ministry received N$342 million during the 2017/18 financial year as fuel tax to the government.

The energy ministry's executive director, Simeon Negumbo, told The Namibian earlier this month that the NEF collected N$371 million from 2017 to 2018 in fuel levies from petroleum products.

The NEF is also the one that pays oil companies to recover the full cost of importing fuel.

ROBBING PETER TO PAY PAUL

The NEF is paying nearly N$7 billion for the fuel storage facility at Walvis Bay. It was estimated to cost N$3,7 billion when construction started in 2013, but the price has controversially ballooned. No one has been held accountable for this increase.

The Namibian reported in 2015 how prime minister (PM) Saara Kuugongelwa-Amadhila and several other top government officials put pressure on the board of directors at the Development Bank of Namibia to approve the funds, which was deemed risky.

This transaction is seen by some in the government as a money-making scheme, which has pushed up the price of fuel. The PM has denied any wrongdoing.

The cost of the storage facility could, however, haunt motorists for decades to come as the government tries to recoup the N$7 billion it spent on the facility.

A 2017 report by former attorney general, Sacky Shanghala, hinted that the government could introduce new taxes, such as the infrastructural levy (would last for 15 years) and the marine facility fees, which would be paid by offshore facilities users, and would be applicable for as long as the storage facility is operational.

Shanghala warned in that report that "this cost will eventually be passed on to consumers".

DEFENCE

An economist at the energy ministry, Abednego Ekandjo, said the government works with oil companies to ensure that they recover the full cost of bringing fuel into the country.

Ekandjo said once fuel arrives at Walvis Bay, the entry port, domestic charges are added on, a factor which increases pump prices.

Oil companies importing fuel into Namibia, including Puma, Vivo Energy, Total and Engen and others, get N$1,15 per litre on fuel for coastal stock, depot maintenance and industry margins.

The Southern African Customs Union charges excise duty of 4 cents (N$0,04) per litre, while service stations charge 100c per litre on both petrol and diesel, the fuel formula from the energy ministry showed.

The NEF pays for the cost of fuel "under-recovery" to the oil companies when the cost of imported fuel is higher than the market price. The oil companies also pay back "over-recovery" costs when the price of fuel goes down, Ekandjo explained.

The government controls fuel prices, giving private companies no discretion to charge what they want, he added.

Ekandjo said fluctuations of international oil prices affect customers positively or negatively, depending on the cost of supplying the fuel.

The economist further said without any domestic charges added onto the basic fuel price, the cost of the fuel, insurance and freight are the most important cost factors.

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