Zambia: Why Finance Bank Facilitated Crude Oil Procurement

The Times of Zambia (Ndola), 23 October 2007

Government has explained that Finance Bank Zambia (FBZ) facilitated the procurement of crude oil because both the supplier and the State were comfortable with the institution.

Finance Minister, Ng'andu Magande said in Lusaka yesterday that when Total refused to supply crude, Gallic Oil, an agent of Litasco of Switzerland agreed to supply 60,000 tonnes of crude oil valued at U.S.$45 million which was paid for by FBZ at short notice.

Mr Magande said at a joint Press briefing with acting chief Government spokesperson George Mpombo, his Energy and Water Development counterpart Kenneth Konga, and Agriculture Minister Ben Kapita that there was nothing irregular about the procurement.

Others at the briefing were Deputy Bank of Zambia (BoZ) Governor Denny Kalyalya, officials from the Zambia National Tender Board (ZNTB), Energy Regulation Board (ERB) and outgoing Ministry of Energy Permanent Secretary Buleti Nsemukila.

Mr Magande said Government was happy that FBZ agreed to pay the money at short notice.

"We had three options. We could have asked ZNCB but we owe them K248.9 billion through the defunct Zambia National Oil Company (ZNOC) and Investrust Bank is still growing," he said.

"We were happy when Gallic Oil said we have a bank in Zambia and it was a bank that we did not owe any money. It is Finance Bank along Cairo road, the chairman is personally known to me and the President, and others," Mr Magande said.

The current 60,000 tonnes of crude would last until November 10 and Government had sourced for foreign currency from the Bank of Zambia for the purchase of 90,000 metric tonnes of crude at a cost of $65 million. The crude would be supplied by Gallic Oil.

Mr Magande said other shareholders for Indeni Refinery would be sought after the rehabilitation of the plant and each shareholder was required to pump in $65 million for the works.

Mr Konga said despite the fuel prices on the international market being at $90 per barrel, prices in the country had not been increased since April because of the Strategic Reserve Funds.

ERB executive director, Silvester Hibajene said since 2005, K140 billion had been collected through the Strategic Reserve Fund and K110 billion had been used to cushion the prices of petroleum products.