Word of Caution for Energy Fund

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By Wezi Tjaronda WINDHOEK Old Mutual African Operations Managing Director, Johannes !Gawaxab says the National Energy Fund should put in place relevant management to avoid a situation where central government has to transfer money to the fund. !Gawaxab said relevant management, as opposed to archaic and outdated methods of the National Energy Fund, is a prerequisite to mitigating against the central treasury bailing the fund out in managing the volatility of fuel price increases in the country. The current budget has made an allocation of N$50 million for the fund to reduce the gap of the fund’s accumulated loses of N$206 million, which resulted from government selling fuel for much less than it was imported. The State Account cushioned the effects of the continued rise in oil and fuel prices last year, which resulted in accumulated deficits in the National Energy Fund. “The robust and rigorous management of Namibia’s energy supplies is required to avoid adverse consequences on the country’s economic growth,” he said. The OMAO Managing Director added that the fund should engage expert resources to manage the volatility of the oil prices as well as fluctuations in the exchange rate so as to reduce accumulated losses and ensure that the fund is self-sustainable. Global oil prices, according to !Gawaxab are not only likely to be at higher levels for longer periods but are also to remain volatile because of demand, which appears to be the main driver of the volatility, unlike the supply shocks experienced previously. “South East Asia, particularly China and India are major importers of fuel to boost industrial production and demand for oil is unusually high,” he said, adding that during 2003/4, China’s oil demand growth outstripped its Gross Domestic Product growth. !Gawaxab also said that improved energy security including the establishment of storage facilities for dealing with emergencies would in addition to the robust management, go a long way in ensuring sustainable economic growth. Government has also made a budgetary provision of N$750 million during this Medium Term Expenditure Framework, with N$250 million allocated under the 2006/07 financial year, investments which will go towards the development of Nampower’s Kudu Gas to power project. When she presented the 2006/7 Budget Speech, Finance Minister Saara Kuugongelwa-Amadhila said the financial commitment, even though it covers only a fraction of the total financing needs, showed government’s commitment to the Kudu project. Since the rising oil prices and the increasing electricity demand in the SADC region are two challenges that Namibia will face in the near future, the minister said Namibia has to be prepared to manage the risks. !Gawaxab welcomed the budgetary allocation to NamPower, saying it was imperative to the country to speed up its investment programme significantly in order to meet the growing energy demand as well as avoiding disruptions and blackouts.