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Swaziland Fuel Price Trends and Forecast White Paper – Updated March 2015

(For information purposes only)

Introduction

Swaziland presently imports all required petroleum products from

South Africa who currently provides 40% of Swaziland's imported

energy demand, 90% of which is represented by petroleum

products.

The Ministry of Natural Resources plays a regulatory role in the

petroleum downstream activities, in particular the pricing of all

controlled petroleum products i.e. petrol, diesel and illuminating

paraffin. The Ministry also regulates the number of service stations

in the country through the Petrol Rationalisation Committee,

which achieves its role through the Service Station Rationalisation

Plan (RATPLAN).

A sharp increase in the price of fuel captures both the corporate

sector and private community’s attention and directly impacts

the local economy. More to the point, our corporate sector

clients are struggling to manage rising operational expenditure

and it has become a virtual nightmare to try and

budget/estimate the single biggest expense in the fleet.

In completing more than 50 detailed fleet reviews, the Eqstra

Fleet Consulting team has estimated that fuel now contributes

between 42% and 48% of overall corporate fleet expenditure.

In light of this fact it is worth noting that Swaziland’s fuel price has

increased by more than 100% within the last 15 years. This

equates to an average increase of 7% year on year. Given that

the average CPI over the same period was 9.84%, effectively fuel

increases have surpassed the CPI index by 72%.

.

Pricing of Petroleum Products

The Ministry of Natural resources is responsible for marketing and

distributing fuels. It is also responsible for setting fuel prices.

All regulated petroleum products are presently imported from

South Africa. The objective is to keep petroleum prices

affordable to the public by undermining the volatility in

international oil prices and the Lilangeni/Dollar exchange rate

over which the government has no control.

As a result it takes some time for fuel price movements to be

actioned on the local pump price as the Government takes time

to adjust it. The last Government fuel price release

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was made on 2 December 2014 effective 3 December 2014.

. 03-12-2014

Fuel type/Price Unleaded Petrol 95 Diesel

old E12.60/Litre E12.85/Litre

New E12.20/Litre E12.45/Litre

Calculation of Pump price

It is unclear which methods and policies are in put place by

Government to apply the fuel subsidy. How the local fuel price is

determined is not disclosed to the public.

The graphs below illustrate that historically the local fuel pump

price is lower than South African prices, although due to the

falling international oil price and South Africa’s timely response

thereto, and to the slower response by the Swaziland

Government, this has changed in recent months. These figures

take into account all costs relating to transport, tax, storage and

regional distribution to different petrol stations.

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1995 2000 2005 2010 2015 2020

RSA Petrol VS Swaziland Petrol pump price

Swaziland Petrol RSA Petrol

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1995 2000 2005 2010 2015 2020

RSA Diesel VS Swaziland Diesel Pump price

Swaziland Diesel RSA Diesel

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Swaziland Oil demand

Figure1: Swaziland Annual Fuel Price 2000 - 2015

Although there was a slight reduction in price during 2014, fuel

has increased on an average of 8% YoY since 2000.

The Swaziland government kept fuel prices unchanged from

January 2013 until March 2014. Although this stance has lowered

inflation, some economists feel this will have an adverse effect

on the economy, as they expect that fuel prices could increase

steeply once the government adjusts for price adjustments.

As at February 2015, the price of fuel is SZL12.20 for leaded and

SZL12.20 for unleaded, with the wholesale price of diesel (0.05%)

at ZSL12.45.

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Swaziland Oil consumption

consumption

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Swaziland Annual Fuel Price 2000-2015

Petrol Diesel

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The Currency Exchange Rate

Source: http://www.oanda.com/currency/historical-rates

Swaziland’s currency exchange rates to the US dollar closely

follows that of South Africa.

The Future

Given the current situation, and taking into account the Brent

Crude Oil predictions and currency exchange factors, we

anticipate that the Swaziland fuel price will increase between 8

– 9% until December 2015. We therefore recommend that an

annual inflation of at least 8% is budgeted for fuel in 2015.

We would also recommend that you review your fleet mix and

operational costs at least every two years to ensure you optimise

cost and efficiency within your fleet.

Should you require any assistance in this regard, please contact

the Fleet Consulting team directly or via your account manager.

All rights reserved. The information contained in this document is confidential and has been prepared by EQSTRA

FLEET CONSULTING solely for information purposes to our strategic clients; it is not to be relied upon by any third party

without our prior written consent.

This report, whilst based on the most realistic information and proven statistical methodologies available to us at

publication, is intended to provide general information. It is not an exhaustive treatment of the subjects raised.

Accordingly, it should not be relied on to address specific situations or circumstances and is not a substitute for

accounting, tax, legal, or other professional advice.

Before making any decision or taking or refraining from any action which might affect your finances or business affairs,

or those of your employees, you should consult a qualified professional adviser to validate.

For more information, please contact Themba Nkambule, +234 706-914-4617 or tnkambule@eqstrafleet.com

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Exchange rate trends USD/SZL and USD/ZAR

USD/SZL USD/ZAR