SMEs Compete director Danny Meyer has urged government to commit to the full rehabilitation of the rails and the expansion of the rail network system to counter future fuel-hike induced economic shocks.
This comes at a time when Windhoek-local motorists are currently reeling from a fuel price hike which saw petrol hitting the N$11 per litre mark. Meyer has urged government to respond to the urgency of getting the State-Owned-Enterprise, TransNamib up and running to save millions of thousands of litres of liquid fuel annually.
“Getting the rail network fully rehabilitated and the long talked about rail expansion projects underway is a step in the right direction, likewise, the urgency to get state-owned enterprise, TransNamib operating at an optimal level,” says Meyer.
Although it would be a daunting task to optimally roar the derelict engines to life again, Meyer affirms that it would be worthwhile getting cargo and people moved around the country by rail rather than on fuel intensive trucks or busses. Quest Consult analyst James Cumming submits that while such an ambitious project may be possible, but maintenance of the locomotives would be a herculean task.
“It’s one thing buying the locomotives and another thing to maintain a trouble free railway. We do not have the time and expertise at the moment, it takes time for the engineers to be taught and work on them. It’s a long term thing. Expanding on the rail system should have been done 20 years ago,” he says.
Meyer also says, “The rise in the fuel price at the petrol pumps cannot be attributed wholly and solely to the rising oil producers price, as it incorporates a plethora of taxes and levies. Assessing the relevance of some of the money raked-in with every litre sold is long overdue.” Analyst at Economic Association of Namibia (EAN) Klaus Schade opines that it is expected that oil prices will fluctuate around current levels.
“However, it depends on whether the cap on oil production agreed upon by the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC countries will continue. Furthermore, local fuel prices depend on the strength or weakness of the NAD vis-à-vis the USD,” he said. He submits that possible interest rate hikes in the US this month could pressure on emerging markets currencies including the Namibian dollar and increase the oil prices in the Namibian dollar and consequently result in further price adjustments.
Economic forces in terms of supply and demand play a part in producer price adjustments, this is the strategy currently deployed by OPEC member states – cut supply and demand will force prices up. “The aim is to force the price of a barrel of oil back to where it was years ago. Back to levels of those good old times, as they view it,” says Meyer He however predicts that OPEC might soon discover that those oil producing nations who are not part of the OPEC club are not prepared to play by the same rules.
“They will sell the oil they produce to their best advantage and not according to terms and at a price manipulated by OPEC,” he delivers. While complacency might have crept in when oil prices dropped, Meyer says, “It might now again be the right time to resume research with renewed vigour, thereby demonstrate to OPEC that the quest to find alternate sources of fuel and to produce more fuel efficient engines, is not forgotten.”
Fuel prices increased in March owing to slightly higher international oil prices, an under recovery during Febru ary and an increase in the levy to fund the oil storage facility and the increase in the dealers’ margin. Schade says, “The appreciation of the Namibia dollar vis-à-vis the USD has softened the necessary price adjustments. Fuel prices have remained unchanged since September 2016.”