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Lesotho Fuel Price Trends and Forecast White Paper – Published March 2014

For Information Purposes

Introduction

Lesotho’s entire petroleum requirements are met through

imports as the country does not have any established reserves

of crude oil. The country is a mountainous enclave surrounded

entirely by South Africa. 95% of its fuel is imported from South

African based multinational oil companies.

There are five importers and marketing companies involved in

the distribution and retailing of petroleum products, these being

Chevron, Engen, Total, Shell and BP.

Wholesale petroleum prices are regulated by the LPF (Lesotho

Petroleum Fund).

Prices are regulated on a monthly basis and the country is

divided in four country zones due to the difference in the

transport terrains. The fuel price only differs by 3% among the

four zones.

Pricing of Petroleum Products

The reliance of the country on oil products from South Africa

simply means that the world market oil price increase

automatically flows through to Lesotho’s internal fuel price

structure. The country pays premiums on all charges from South

Africa on all oil products to help finance the Sasol Synthetic fuel

plants.

As in South Africa, The Ministry of Energy controls the price of fuel

at a higher level but the Lesotho Petroleum fund is the organ

instructed to regulate the monthly fuel price.

Unfortunately, we can only speculate on the fuel price structure

as this information is not available to the public.

Calculation of Pump price

Considering the fact that fuel is imported, the South African fuel

price calculation, demonstrated in the table below, is

applicable. However a Lesotho Petroleum Fund fuel subsidy

makes it affordable for the local market.

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COMPOSITION OF THE RETAIL PRICE OF PETROL AND THE WHOLESALE PRICES FOR DIESEL IN INLAND (GAUTENG) FOR

THE PERIOD 07 Jan 2015 TO 03 Feb 2015 WILL BE AS FOLLOWS:

Inland Fuel Prices (Zone 9C)

FUEL PRICE Petrol 95 ULP Petrol 93 ULP

&LRP

Diesel

* 0.05%S

Diesel

*0.005%S

Illuminating

Paraffin

cent per litre cent per litre cent per litre cent per litre cent per litre

Contribution

to

the basic

fuel

price (BFP)

440.250 428.250 480.630 485.030 491.128

Wholesale

margin

33.500 33.500 64.700 64.700 64.700

Service cost

recoveries

30.000 30.000 30.000 30.000 30.000

Storage,

handling &

delivery

costs

17.400 17.400 17.400 17.400 17.400

Distribution

cost

12.600 12.600 12.600 12.600 12.600

Router

Differential

- - - - 7.400

Dealers

margin(*)

151.100 151.100 - - -

Zone

differential

in Gauteng

33.100 33.100 33.100 33.100 52.700

IP Tracer

levy

- - 0.010 0.010 -

Fuel levy 224.500 224.500 209.500 209.500 -

Slate levy - - - - -

Customs &

excise duty

4.000 4.000 4.000 4.000 -

EQF Levy - - - - -

RAF levy 104.000 104.000 104.000 104.000 -

DSML

(Inland

Demand

Levy)

10.000 - - - -

Petroleum

Pipelines

Levy

0.150 0.150 0.150 0.150 -

Subsidy

from

Equalisation

Fund

- - - - -

Incremental

Inland

Transport

Rec Levy

0.400 0.400 - - -

Sub-total 590.750 580.750 445.460 445.460 154.800

Retail price 1,031.000 1,009.000

Wholesale

price

879.900 857.900 926.090 930.490 645.928

Source:http://www.shell.com/zaf/products-services/on-the-road/fuels/petrolprice.html

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0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

1998 2000 2004 2006 2008 2009 2010 2011 2012 2013 2014 2015

Loc

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urr

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cie

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Lesotho vs RSA Diesel Fuel Price

Lesotho Pump price for diesel fuel (LSL per liter)

South Africa Pump price for diesel fuel (ZAR per liter)

0

50

100

150

Petrol Diesel

Mill

ion

Vo

lum

e L

ite

rs

Fuel Consumption Growth from 2006 to 2010

Fuel Consumption

2006 2010

Lesotho Fuel Consumption

Source: https://www.undp-aap.org

Fuel consumption grew significantly between 2006 and 2010.

Figure1: Lesotho vs RSA Annual Fuel Price 1998 – 2015

Diesel is clearly subsidised by the Lesotho Government –

although Lesotho imports all its refined diesel it is still cheaper

than South African diesel which supplies the fuel.

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0.00

5.00

10.00

15.00

1998 2000 2004 2006 2008 2009 2010 2011 2012 2013 2014 2015

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urr

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cie

s

Lesotho Vs RSA Gasoline Fuel Price

Lesotho Pump price for gasoline (LSL per liter)

South Africa Pump price for gasoline (ZAR per liter)

Source: World Bank

Similarly it is apparent that petrol is also subsidised by the

Government.

The significant drop in the fuel price is largely due to:

The focus by OPEC producing countries on increasing their

market share

Slow and deteriorating EU economies and the slowing of Asian

economies, leading to a significant reduction in demand levels

Significant growth in the U.S. domestic crude oil production

As a result there is an oversupply of Brent crude oil in the

market, and prices have dropped accordingly.

The LFP announced the new price structure linked to the falling

oil price.

Table: Domestic Fuel Price as at 08 August 2014

Zone 1 Zone2 Zone 3 Zone4

Petrol 11.95 12.01 12.04 12.13

Diesel 12.35 12.41 12.44 12.53

Source: :Lesotho Petroleum Fund(August 2014)

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The Currency Exchange Rate

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

Lesotho’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 Lesotho fuel price will increase between 7 –

8% until December 2015. We therefore recommend that an

annual inflation of at least 7% 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 and 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.

Willie Venter: Manager Fleet Consulting, Email address: wventer1@eqstrafleet.co.za; Physical address: 12 Corobrik

Road, Meadowdale, Johannesburg, South Africa

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Exchange Rate Trends USD/LSL and USD/ZAR

USD/LSL USD/ZAR