Maravi

Standard Bank blames fuel crisis on poor infrastructure

Standard Bank blames fuel crisis on poor infrastructure
By Fridah Zinyama
Tuesday October 23, 2007 [04:00]

STANDARD Bank South Africa has attributed Zambia's chronic fuel shortages to poor maintenance of infrastructure. According to the bank's economic research newsletter, aside from the supply side constraints that have dogged fuel supply for several years, the current boom and pick up in economic activity has also raised domestic demand for fuel.

"The expanding mining industry is simply gobbling up the energy supply," the bank observed.

The bank stated that the poor regional road network contributed to the problems in bringing fuel into the country from neighbouring countries like South Africa, Mozambique and Tanzania following the closure of Indeni Oil Refinery in September.

"The infrastructure constraints in the distribution and refining of oil, coupled with the burgeoning demand due to the expansion in second hand vehicles and the copper industry explain the high fuel prices of up to US$2 per litre," the bank noted.

Standard Bank added that about a third of the country's commercial electricity needs are met by oil derived products and the remainder by hydropower and coal.

"Zambia has not only been experiencing fuel shortages but is also likely to be affected by its limited capacity to generate power for the country following the increase in demand for the commodity," the bank stated.

Standard bank noted that Zambia would cease being a net exporter of electricity in 2008 due to its limited capacity to meet local demand because of lack of recapitalisation in the much need machinery.

"The general local view is that Zambia has a looming energy crisis.

Load shedding is the norm, as some power generation stations are rehabilitated, and this is hurting the industry, forcing it to operate at low capacity," the bank stated. "There is uncertainty that Zambia's largest power utility, Zesco, is capable of expanding the energy supply to meet present day needs."

Standard bank stated that the general view among some members of the donor community is that the commercialisation of Zesco has not been effective and tariffs are still too low to adequately cover the costs of producing electricity.

"This explains the prospective 60 per cent hike in electricity tariffs; however, that will not solve the supply problem. An energy shortage is one of the biggest deterrents to the Zambian authorities' diversification drive," the bank noted.

Standard bank observed that foreign investors would be discouraged by the uncertainties surrounding energy supply and established industries are at risk of performing at under capacity for a protracted period.

"The economy will, hence, elude its economic growth potential, which will stall the poverty reduction process that the government has been striving for," stated the bank.

Labels: FUEL, INFRASTRUCTURE

posted by MrK @ 4:21 AM