Govt blocks N$10 billion fuel deal

THE government has blocked a proposal of the National Petroleum Corporation of Namibia (Namcor) to procure bulk fuel for storage at the Walvis Bay storage facility worth N$10 billion.

Namcor says the deal will avert recurring fuel-price increases in the future.

Namcor managing director Immanuel Mulunga says the company’s board has sent a proposal to the government asking for permission to procure fuel in bulk for storage at the facility, which was shot down by minister of public enterprises Leon Jooste.

“Namcor has been operating the national oil-storage facility at Walvis Bay for a year now. Although it is primarily used for commercial purposes, the Namcor board has approved a recommendation from management to buy fuel on a long-term basis to make sure we have long-term contracts to procure fuel in large quantities to ensure security of supply.

“This was unfortunately blocked by the shareholder, and we are unable to stockpile products for times like these. We have not done an exercise to predict where oil prices would be in the foreseeable future,” Mulunga says.

He says the company is concerned about expected future increases in fuel prices, which have been triggered by the ongoing Russia-Ukraine conflict.

“Unfortunately, since we are not the regulator of fuel prices, we have no choice but to accept those high prices,” he says.

‘ALMOST RAN OUT’

A source claims Jooste got involved in the process and convinced minister of finance Iipumbu Shiimi to stop Namcor from procuring fuel on a long-term basis.

“The situation was so bad that he influenced the minister to withdraw our exemption to procure petroleum products, which resulted in Namcor making huge losses in December, because we could only procure fuel in small quantities.

“We almost ran out of product to supply our customers, which include the Ministry of Defence and the Namibian Police. Fortunately the minister of finance reinstated our exemption after he was warned of the possible consequences,” the source says.

He says Jooste’s reasons for blocking the deal are not valid.

“Namcor already had an exemption to procure petroleum products on its own using the request-for-quote method. A decision was made to implement a three-year term deal-procurement approach, which would have given us better pricing and security of supply.

“This was approved by the Namcor board, but the minister of public enterprises intervened and had the minister of finance stop the whole process,” the source says.

“Not only did he [the minister of finance] stop this process, he was advised by the minister of public enterprises to retract the exemption we already have, which resulted in Namcor not being able to procure petroleum products on its own at all in December,” he says.

The source told The Namibian it would have been a long-term supply contract that “would have given us economies of scale and therefore better pricing”.

The source further says Jooste’s decision to block Namcor’s bid for an exemption resulted in the company suffering huge losses.

“This is an example of political influence that can get this country in trouble,” he says.

‘PRONE TO ABUSE’

Meanwhile, Jooste says Namcor’s proposed exemption to procure fuel on a long-term basis fell outside the confines of the granted permission.

“Namcor received a procurement exception from the minister of finance on 29 October 2020 for short-term procurement purposes. Honourable Alweendo and I became aware that Namcor intended to procure long-term (three-year) supplies under the same exemption, but the long-term procurement falls beyond the confines of the exemption that was granted.

“You can imagine that the value of this approach would be dramatically higher. Honourable Alweendo and I met with the Namcor board and management to discuss the matter where I directed that the matter be formalised in writing for me to seek the opinion of the minister of finance,” he says.

A source within the public enterprises ministry says the proposed exemption by Namcor was “prone to abuse” and could easily open the parastatal up to corrupt dealings.

“Someone is angry because we stopped a potentially questionable deal. And now he/she/they are trying to turn this onto me. The issue is not procurement – they could and can procure long term as they wish – but rather procurement exemption, and the abuse thereof.

“They had procurement exemptions for short-term (three to six months) procurement of fuel and lubricants. Note that they never had long-term exemption for long-term procurement,” the source says.

‘MULTIBILLION-DOLLAR DEAL’

“They then convinced the board that the exemption also covers a new approach where the products will be procured for a three-year period. This would have been a multibillion-dollar – something like N$10 billion! – deal that falls completely outside the confines of the exemption that was granted.

“Now imagine Namcor procuring these products valued at N$10 billion under the auspices of procurement exemption. It’s obvious that a procurement of that size must be conducted through the Central Procurement Board to ensure that a transparent process is followed,” he says.

‘MONITORING SITUATION’

Immanuel Nghishoongele, the deputy petroleum director of petroleum affairs and acting petroleum commissioner at the Ministry of Mines and Energy last week said Namcor is already using the facilities for their own consumption and that of other companies.

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