Experts Raise Alarm Over Government-to-Government Fuel Deals

Concerns are mounting among experts and industry stakeholders over the government-to-government (G2G) fuel procurement strategy that will make the National Oil Company of Malawi (Nocma) the sole importer of fuel. Critics argue the move could worsen economic challenges, citing risks of inefficiency, corruption, and debt accumulation.

Set to take effect by March 2025, the G2G arrangement allows Nocma to procure fuel from international companies, bypassing the Public Procurement and Disposal of Assets Act. While touted as a solution to persistent fuel shortages, critics fear the approach mirrors the pitfalls of Malawi’s subsidized fertilizer program, which has been fraught with inefficiencies and financial mismanagement.

Concerns from Procurement Experts

Steven Manda, a member of the Malawi Institute of Procurement and Supply (Mips), cautioned against the single-sourcing mechanism inherent in the G2G deal, warning of potential price inflation due to unchecked collusion between buyer and supplier.

“Without competitive bidding, there’s no accountability in pricing, and this could burden the country with exorbitant fuel costs,” Manda explained.

Bonwell Grey Makuwira, another Mips member, added that the strategy fails to address the root cause of Malawi’s fuel crisis—forex shortages. “We are essentially borrowing more to buy fuel, exacerbating an already critical debt situation,” he said.

Makuwira also criticized the Delivered at Place Unloaded (DPU) method, which he argued favors foreign transporters at the expense of local businesses.

Flawed Comparisons with Kenya

An industry insider questioned the viability of replicating Kenya’s G2G fuel procurement model, pointing out Malawi’s lack of revenue sources such as exports, tourism, and diaspora income.

“Kenya’s economic dynamics are vastly different. This comparison risks setting us up for failure,” the source said, urging the government to involve the private sector in emergency fuel imports while focusing Nocma’s role on managing strategic reserves.

Impact on Fuel Prices and Reserves

A former board member of the Malawi Energy Regulatory Authority (Mera) attributed fuel shortages to misaligned pricing policies, which have resulted in significant exchange losses. He criticized the move to shift regulatory oversight from Mera to the Office of the President and Cabinet, calling it “a dangerous centralization of power.”

“This strategy could make fuel as politically contentious and financially disastrous as subsidized fertilizer,” the former board member warned.

Government’s Defense

Energy Minister Ibrahim Matola defended the G2G framework, arguing it will streamline forex allocation and stabilize the local currency. Matola highlighted partnerships with major oil companies like Abu Dhabi National Oil Company (Adnoc) and Saudi Arabia’s Aramco, emphasizing potential savings through bulk procurement.

“The G2G system reflects the true demand for forex and could result in currency stabilization,” Matola said.

President Lazarus Chakwera also underscored the importance of the bilateral agreements during a recent national address, stating that UAE President Sheikh Mohamed bin Zayed Al Nanyan is sending a team to finalize the technical aspects.

Economic Implications

Malawi’s annual fuel import bill stands at $600 million, while the country generates $1 billion in forex annually. With a $3 billion total import bill, critics argue that prioritizing single-sourced fuel procurement under G2G risks crowding out other critical imports, worsening economic instability.

Legislative Loopholes

The amendment of the Liquid Fuels and Gas (Production and Supply) Act allows the G2G arrangement to bypass procurement laws. Critics worry this will reduce transparency and accountability in a sector already plagued by challenges.

As the March 2025 deadline looms, the debate around G2G fuel procurement underscores broader concerns about governance, transparency, and economic management in Malawi. Whether the strategy can deliver promised benefits or spiral into a financial burden remains a pressing question.

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