Fuel consumption grows 74 per cent

Statistics from Rwanda Revenue Authority (RRA) indicate that the consumption of petroleum products is annually increasing.

Statistics from Rwanda Revenue Authority (RRA) indicate that the consumption of petroleum products is annually increasing.

Whereas the country’s fuel imports stood at 102 billion litres in 2003, the volume increased to 178 billion litres in 2007—a 74 per cent increase.

The Treasury is cashing in on this booming business. Between Frw15 billion and Frw18 billion is collected annually in taxes.

The high increase, according to government is due in part to the booming economic activities and profitability of petroleum products business. The sector has remained profitable partly because Government cushions both dealers and consumers through heavy subsidies. Figures from Ministry of Commerce indicate that government subsidises on fuel are 90 per cent, the highest in the region. This has kept the fuel in the country slightly cheap, left consumers happy but it has also made the fuel business very attractive.

If government was not subsidising on fuel, the prices would be three times higher, Mary Baine, RRA Commissioner General once said while appearing on Contact Radio—Cross Fire, a city FM station talk-show. Currently the pump price for petrol and diesel is Frw659 per litre, this is very competitive in the region.

The profitability of the petroleum sector in the country has attracted many players.

Several fuel stations are mushrooming in different parts of the country, with Kigali City registering a lions’ share. As a result motorists have a variety of filling stations, strategically positioned to choose from.

Enterprise Rwandaise de Petrole (ERP), Societe Generale de Petrole (SGP), Rwanda Petrolgaz, Total and Kobil and Caltex are among the major petroleum importing companies in the country. They mainly sell automotive gas oil (AGO) also known as diesel, Illuminating kerosene(IK) and premium motor spirit (PMS) commonly known as petrol.

Information from Ministry of Commerce indicates that the profit merging on diesel and petrol has increased from Frw19 per liter in 2006 to Frw29 per liter to date. This therefore has attracted many fuel retailers.

Some of them include Hashi Empex, Dalbit, Gemeca, Gapco, Decentre, Total, Hass and Kobil.

Others include; Caltex, Confiance, Dallars, Delta, Merez and Citiex.

Source Oil, Max, Fatuma, Sopetrad, Stipag and Hope filling stations also retail fuel in the country.

With competitions, Fuel companies have therefore improved their services and set up more fuel filling stations. For example, Total had 17 stations in 2006 but now has 20 including, a new fuel station being constructed near Kimironko market to and another at Giti Kinyoni on the Kigali-Huye/Gisenyi stretch. Sopetrad in Kigali City is already operating.

"Apparently there is cut throat competition between Kobil Rwanda and Total Rwanda. This is because Kobil as a newcomer and big investor is trying to acquire consumers while Total as a long time investor in Rwanda, wants to maintain her consumers," John Rwangombwa, the Secretary to the Treasury said.

In 2006, the Treasury received Frw1.7 billion in VAT contributions from Total, while last year, Frw1.8 billion was got.

Kobil, is another larger fuel importer and retailing company in the country with filling stations at strategic locations. According to RRA statistics, in 2006, Kobil paid Frw659 million in VAT contributions and last year the VAT increased to Frw1.4 billion.

Vehicles guzzling fuel

Statistics from RRA show that whereas 2,149 units of vehicles were imported in 2003, there was an increase to 4,474 last year.

Therefore the need to invest in fuel stations and import more petroleum products to meet the increasing demands thus growth of the fuel sector.

Some economic commentators attribute the high fuel consumption to the booming construction industry.

Companies like Roko Construction, Thomas and Pyron Construction and Fair Construction, consume millions and millions of litres at sites to run the heavy machinery and fuel vehicles delivering materials.

The unstable, hydro-electricity power supply in the country has also greatly contributed to the high increasing volumes of fuel consumed.

It is estimated that Electrogaz uses approximately 3 million liters a month to run the generators that produce thermal power that runs industries and light houses in Kigali City.

The fast growing telecommunication sector has also greatly led to current increase in volumes. To run the upcountry base stations, the two telecom companies, MTN and Rwandatel burn thousands of litres daily. The New Times could not however get the volume of fuel the telecom companies use daily.

Investors speak out

Some investors however say the consumer market is still low and the Rwandan market is mainly of network nature, implying that the market is growing due to increase in number of vehicles not consumption by companies.

"We are also meant to fulfill certain requirements and standards in order to operate a petrol station. Meeting requirements such as environment impact assessment, cathodic protection (a technique to control corrosion of a metal surface) of our single steel walled underground tanks and other requirements like these which are very expensive and the experts or necessary equipment may not be available in the country. Importation of such cuts into our margin and affects our profitability," A director of one oil company who preferred anonymity saying oil matters are sensitive said.

Some new entrants in the fuel retail business claim that their increased sales depend on good service especially because they are many players in the sector. However, the economy is growing and so is the market therefore business is actually very good lately. They say their volumes are increasing as a result of increase in sales.

All said and done, the development of the fuel sector is one clear effect of economic growth and one can easily conclude that the country is on the right track of development evidently seen mainly through infrastructural development.