The National Oil Company of Malawi (Nocma) is sitting on a time-bomb as fuel supply contracts it has with two firms for the year 2021/2022 expire this month.

But the State-owned fuel company, which should have started processes to renew the contracts, or advertise for fresh ones three months ago, is yet to start the processes.

Most of Nocma’s fuel is delivered by tankers

Against the background of a fuel crisis in some parts of the country due, in part, to forex shortages, the delay in advertising for new contracts risks further disruptions in fuel supply should the country be plunged into the same controversy that surrounded awards of fuel importation contracts last year.

While Nocma has played down the delay to begin the process of sealing fresh contracts, governance observers fear officials could be creating a crisis to circumvent procurement processes that would make bidding competitive.

The company’s deputy chief executive officer Hellen Buluma said in an interview on Tuesday that they will have two options—either to advertise or seek an extension of the current contracts.

To take necessary measures: Buluma

“Nocma will take all necessary measures when time is right. If we are to advertise everyone will know in terms of how the process is going to be managed.”

However, an insider familiar with fuel procurement processes told Weekend Nation that Nocma needs at least three months to finalise the bidding process—from the date advertisements are floated for a seamless supply of fuel during the transition—meaning that under normal circumstances, it should have floated the adverts at the end of June this year.

In September last year, Nocma awarded Lake Oil Limited and Camel Oil (T) Limited to supply and deliver 100 000 metric tonnes (MT) of fuel and 54 820 MT of refined petroleum products respectively, from Beira and Nacala in Mozambique and Dar es Salaam in Tanzania after a six-month delay which threatened to create fuel shortage in the country.

The delay came after the Anti-Corruption Bureau (ACB) in June 2021 restricted Nocma’s fuel procurement process to pave the way for investigations following alleged anomalies in the process.

ACB’s move came after the High Court had earlier granted the Fuel Tankers Association an injunction stopping Nocma from using the Delivered Duty Unpaid (DDU) system of importation, arguing that the system was not provided for in the country’s laws, it thwarts their business opportunities and is expensive.

Malawi Energy Regulatory Authority (Mera) board had also earlier declined to approve Nocma’s application to award contracts to the selected suppliers, citing concerns of overpricing.

The board argued that the contracts were expensive and would cost the taxpayer K45 billion more due to the DDU procurement system that Nocma’s two preferred bidders wanted to use.

Amid the wrangles, ACB in August 2021 arrested former minister of Energy Newton Kambala, ex-presidential adviser on strategic planning Chris Chaima Banda and Alliance for Democracy president Enoch Chihana for allegedly attempting to influence the awarding of the contracts. The matter is still in court.

In an interview on Wednesday, Mera director general Henry Kachaje refused to directly comment on Nocma’s fuel procurement position.

He said they are on top of the situation and will deal with all issues requiring their involvement.

According a memo from PPDA which we have seen, for all framework agreements which are expected to run for one year, the procuring entity at the expiry of the contract may through its internal procurement disposal committee, extend the contract for one more year and, also, submit all relevant documentation to the authority to demonstrate that there is a renewal .

Reads the memo: “Prior to the expiry of the framework agreement, the procuring and disposing entity shall verify if there is a need to replace the current framework agreement instead of continuing it through any extension period. To carry out such verifications, the procuring and disposing entity may carry out a performance review of the current framework basing on prices, savings , complaints, suppliers, eventual market changes or new entrants , recorded lessons learnt, from both procuring and disposing entities and the private sector.”

On his part, Parliamentary Committee on Natural Resources chairperson Welani Chilenga said in an interview on Tuesday he was optimistic that the Public Procurement and Disposal of Public Assets Authority (PPDA) would grant Nocma an extension as the current suppliers have performed above expectations.

He said: “For instance, some of the suppliers have been supplying fuel to Nocma even before remission of foreign exchange.

“As a committee, we travelled with Nocma officials to Tanzania where we were able to see that a good number of the suppliers have been able to transport the fuel into the country on their own and that is way cheaper than using local transporters.

“We are more comfortable with Nocma importing even 100 percent of the fuel because private businesses are unpredictable and may plunge the country into a crisis.”

Nocma currently imports 55 percent of the country’s fuel, with the remaining 45 percent imported by privately-owned consortium of Petroleum Importers Limited.

But former energy and mining technocrat Grain Malunga has observed that if the contracts are not re-advertised soon, government stands to lose in terms of new suppliers who might have offered lower bids than what is prevailing now.

“The public hasn’t been told how the current suppliers have performed to warrant an extension; and at the same time, government stands to lose in terms of new players that may have offered competitive prices. There is also the on-going differences of which incoterm [method of importing fuel] to be used between DDU and Ex-tank, and all that can only be resolved once the new fuel contracts are in place,” he said.

Human Rights Defenders Coalition national chairperson Gift Trapence, whose organisation last year asked ACB to investigate the controversy-riddled fuel contracts, blamed the delays on what he called a ‘dysfunctional board ’, which he says has to be dissolved.

According to him, Nocma is currently unstable as it has no full top management to make decisions, adding that ignoring the problems rocking the company is a recipe for disaster.

Governance observer Charles Kajoloweka said in an interview that Nocma should account for the delay in beginning the tendering process considering the controversy surrounding the fuel importation deal last year.

Kajoloweka, who is also executive director of Youth and Society, stressed that Nocma needs to demonstrate high level standards.

He said: “The process of identifying new suppliers has to be more transparent this time around and avoid any potential shenanigans.”

Centre for Social Accountability and Transparency executive director Willy Kambwandira, in an interview, described the delay to re-advertise as regrettable, saying it smacks of poor strategic planning.

He hoped that the delay to re-advertise is not a result of some officials at Nocma trying to deliberately create a mess they can benefit from.

“The functionalities of Nocma have been tactically crippled. We cannot have people holding strategic positions in acting capacity for this long. They are challenged in terms of decision-making. Malawians should brace for continued fuel shortages,” said Kambwandira in reference to Buluma, who has headed Nocma in an acting capacity for over a year.

Since last weekend, some parts of the Central and Northern regions experienced fuel shortage which both Mera and Nocma admitted this week was partly due to forex shortage which is making it difficult for fuel suppliers to import large volumes of the commodity.

Malawi’s import cover, now at one and a half months, the lowest this year, has been worsened by protracted balance of payment challenges in the absence of an extended credit facility programme with the International Monetary Fund.

Lilongwe Game Complex.

Mid-August this year, Registrar of Political Parties Chikumbutso Namelo warned that he will whip political parties that will not declare their assets and sources of donations in line with the Political Parties Act.

He said his office was analysing submissions that some political parties had made, but could not disclose the parties that were yet to make the submissions after missing the July 8 2022 deadline.

The Political Parties Act of 2018, among others, compels political parties to disclose to the Registrar of Political Parties sources of their funding and any donations of specific amounts. Meanwhile, the Malawi Law Society took the Registrar of Political Parties to court to demand that he discloses the sources and amounts of money the four major political parties received between January 1 2019 and December 31 2020.

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