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Namibia: Fuel prices ‘could cripple economy’

Posted by African Press International on May 20, 2008

Publisher Korir, africanpress@getmail.no source: The Namibian (Namibia), by Tonderai Katswara

The latest fuel hike could force major industries to cut back on production, granting no wage increases and possibly laying off workers because of shrinking profit margins.

These views were expressed by some industries The Namibian spoke to following yesterday’s fuel price hike, which represents an increase of around 56 per cent since the middle of last year. Farmers, fishermen and miners all lamented the increase, which according to them will derail all intended new investments and could also lead to bankruptcy in some extreme instances. For many farmers it could be the final nail in the coffin, as they are just coming out of a taxing drought.

Fishing, agriculture and mining – the mainstays of the Namibian economy – are Namibia’s major export revenue earners and employers. These sectors use heavy-duty equipment which consumes thousands of litres of fuel per month. Petrol currently costs more than N$9 per litre while diesel costs over N$10 per litre. Major players in the fishing industry, Etale Fishing Company and Tunacor Fisheries, on Wednesday said the increase of the diesel price had put severe pressure on their operations, as input costs would spiral up.

“More than 40 per cent of our costs goes to fuel. This is a big expense, and we are currently looking at ways how we can improve our fuel consumption,” said Etale’s Managing Director, Silvanus Kathindi.
He said the company was avoiding retrenchments, but that the rising diesel price was a ‘big concern’ to the industry. Etale’s fishing vessels use around 50 000 to 70 000 litres of fuel per trip, which normally averages nine days at sea. The company currently undertakes three trips a month.

A senior manager at Tunacor, who preferred anonymity, echoed Kathindi’s words, saying the increasing fuel costs were putting pressure on profit margins. “We are currently looking at purchasing newer vessels which use fuel more efficiently. However, this needs huge investment.” He added that the way out of these current problems was to focus on adding value to exports and maximising the income generated.
The fishermen’s union said it could now prove impossible to negotiate higher wages with fishing companies, as they would use the fuel costs as a reason not to increase salaries.

In a further blow, NamPower on Tuesday informed mining companies of a 42 per cent electricity tariff increase from July 1. Roessing Uranium – one of the country’s major mining outfits – said the mine’s fuel bill and the impending power crisis would affect operating costs. “Currently the mine uses about 1,6 million litres of diesel per month. With the increase in the price of diesel, it will add another N$14 million to our diesel expenses for the remainder of the year,” said Roessing’s acting General Manager for Corporate Services, Noel Mouton.

Chamber of Mines General Manager Veston Malango said the diesel price hike would hugely affect mines’ profitability and have a negative effect on the mining industry. He warned fledgling mining companies to evaluate the current economic circumstances. “For the new mines planning to come on board… they will have to critically look at how much workforce they need and also their [expected] production levels before starting operations,” said Malango.

Both the Namibia National Farmers’ Union (NNFU) and Namibia Agricultural Union (NAU) said communal and commercial farmers alike were taking a knock as a result of costly fuel. NNFU acting Executive Director Oloff Munjanu said some of their members would be forced to scale down operations, which in turn would hurt production and result in a decline in GDP. NAU Executive Manager Sakkie Coetzee said: “Fuel is a huge part of our production costs – between 20 and 30 per cent.

So our profit margins are under pressure. Production this year will definitely be affected negatively by all these increases.” Coetzee said ways must be found to help especially newly resettled farmers to absorb these increases. Last year’s drought and this year’s floods had brought livestock and crop farmers to the brink of bankruptcy, he said. “This could be the final nail in the coffin for some farmers, as they are already under tremendous pressure,” said Coetzee.

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The Publisher Korir, is the Chief Editor African Press International API

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