BERA reviews fuel pricing formula
The Botswana Energy Regulatory Authority (BERA) will appoint a consultant this month to review the formula being used to calculate fuel prices in the country, in order to “achieve cost reflectivity”.
Known more commonly as the “slate,” the formula is a calculation of the costs involved in supplying and distributing various forms of fuel within the country. Every month, BERA looks at the movements of the various factors in the slate, to gauge whether pump prices are “under-recovering” or “over-recovering”. Both terms refer to whether pump prices are above or below the costs involved in bringing and distributing the fuel throughout the country, which determines pump prices increases or reductions.
BERA caretaker CEO, Grace Tabengwa, said the review of the slate would be aimed at achieving cost reflectivity.
“A project to review the current petroleum products pricing structure, commonly known as the ‘slate’ will be awarded to a prospective bidder in the month of April 2024,” Tabengwa said in a recent briefing with Botswana Oil. “Financial evaluation of the bids has been completed. “The objective of the project is to review all costs associated with the supply and distribution of petroleum products into and within Botswana to achieve cost reflectivity on the pricing slate.
“The project will also review and update the current pricing schedule (price list) and develop a clear formula for price differentials between places around the country.” The latest developments come as Botswana Oil takes over 90% of the country’s fuel imports. The state oil agency has retained ten suppliers in South Africa, Namibia, and Mozambique to provide the 1.2 billion litres of fuel it is required to deliver to the economy per annum. Majority-citizen-owned firms are allowed to import the remaining 10%.
Tabengwa said the slate review would also seek to develop pricing formulas for alternative routes. The current slate leans towards South African supplies and the review will include fuel routed through Namibia and Mozambique.
“Security of supply of petroleum products remains an area of key strategic focus for the government,” Tabengwa said. “The country has, over the years, remained vulnerable to heavy reliance on South Africa as the primary source of supply of petroleum products into Botswana.“While South Africa will continue to be a key strategic partner in the sourcing and supply of Botswana’s petroleum requirements, it has also become apparent that Botswana identifies, explores and operationalises procurement from alternative sources.
“To date, Namibia and Mozambique have been piloted and proved to be viable supply options.”
She said the consultant would also be asked to develop a wholesale margin model which “provides for a more scientific approach to the determination of the margin”. Tabengwa revealed that in the absence of the model, BERA has been reviewing the wholesale margin based on the Consumer Price Index (CPI) which tracks inflation.
The second phase of the exercise involves implementing a retail margin model by June. A previous review last August resulted in the adjustment of the retail margin by 7.3 thebe per litre.
The wholesale and retail margins are the amounts by which fuel importers, oil companies and filling stations are allowed to mark up their sales.