THE Namibian Competition Commission has refused to grant state-owned National Petroleum Corporation of Namibia permission to import 50% of the country’s fuel needs.
Nangosora Tjipitua, the director of enforcement, exemptions and cartels at the competition commission said on Friday that it will just create barriers to market entry, and offer no substantial public benefits.
Namcor had applied to the commission to be exempted from the provisions of the Competition Act last year.
That application was made in respect of a proposed decision (a mandate) by the minister of mines to require 50% of all petroleum imports to be reserved for Namcor, and would further require wholesalers to purchase 50% of their requirements from the state-owned oil dealer.
Additionally, Namcor was planning to be shielded from competition through the exemption for a period of 10 years.
In the statement released on Friday, Tjipitua explained that the commission has to ensure that any pro-competitive gains that may arise from the exemption would outweigh the anti-competitive effects thereof.
Consequently, exemption could only be granted if the commission was satisfied that there are exceptional and compelling reasons of public policy as to why the exemption was necessary.
The commission’s detailed assessment of the exemption application shows that the 50% import mandate proposed by the ministry of mines will lead to the lessening of competition in the fuel market.
The application will not only lead to anti-competitive behaviour in the fuel market, but Namcor also failed to explain whether consumers are offered a fair share of the resulting benefits which would result from the mandate.
The commission furthermore explained that they refused to exempt Namcor from competition as it will create barriers to entry, which are likely to reduce the ability of small and medium enterprises (SMEs) to enter the market.
The proposed mandate, including agreements that would arise, would not be in line with established international best practices, and the commission has established that there is no credible threat to security of supply that would warrant the mandate.
The commission substantiated their decision that the proposed mandate provided no proof that it will promote export, enable small undertakings, and improve the production or distribution of goods, or the provision of services.
Additionally, the mandate application failed to convince the commission that it intends to promote technical or economic progress or stability in any industry designated by the mines ministry.
“In light of the above, the commission has in terms of section 28(1)(b) of the Competition Act made a determination to refuse to grant the exemption in respect of Namcor’s proposed 50% mandate,” the commission stated.
NAMCOR’S PLAN B
Namcor will be managing the N$5,7 billion fuel storage plant at the coast which is currently nearing completion. After the fuel storage project is done, Namcor will need to fill up the storage tanks with various fuel products.
Filling up the storage facility will help the country to fend off oil price volatility in the international markets since Namibia is a net importer of fuel, and has no influence on the price as it is a price-taker.
Namcor managing director Immanuel Mulunga explained to The Namibian last week that they have accepted the commission’s decision, and are not going to appeal.
He also admitted that the main aim why they asked for the exemption was to enable them to fill up the facility since the government had revealed to them that they do not have money to commission the billion-dollar fuel storage facility.
“Obviously, the 50% import mandate would have helped, but for now we will find other means. We can import our own fuel products at competitive prices, and we can capture a sizeable part of the Namibian market on our own,” said Mulunga.
He added that Namcor has the ability to import its fuel needs competitively with existing importers such as Puma and Vivo.
On the storage, Mulunga explained that despite the competition commission’s blow to their plan, they have a contingency plan in place to make sure the storage does not become a white elephant.
“One of the ways that we are going to do it is that we are going to host some of these local fuel importers so that they also store their own products in the facility,” he noted.
He added that as for the commissioning stock, since the government does not have money to fill it up, they asked the local companies which are going to be hosted to procure their fuel products so that it can be used to commission the facility.
“If we would not have done this since the government said they do not have money to fill it up, the N$5,7 billion fuel storage would become a white elephant,” Mulunga reeasoned.
Five companies will be hosted at the facility, and two of them have been publicly chosen to supply the commissioning stock.
As of January 2019, there were about 206 licensed oil companies/traders which are regarded as wholesale distributors, including big names such as Total Namibia, Caltex Oil Namibia, Shell Namibia, BP Namibia, Engen Namibia, and many other local companies.