Hypocrisy of govt in the power sector

Davies

Mining has been Zambia’s economic mainstay and CEC the engine that has unfailingly powered the wheels of mining. CEC accounts for between 45-50% of Zambia’s national energy consumption. Beyond its role on the Copperbelt, CEC is an indispensable member of the Southern African Power Pool (SAPP). It co-owns and operates, with DRC’s national utility, Société Nationale d’Electricite (SNEL), the transmission lines interconnecting the Zambia and DRC electric grids, and which form an integral part of the SAPP central transmission corridor. This is the only connection between DRC and Southern Africa, hence, it’s an indispensable enabler of an interconnected regional power market.

In 2006, Cinergy Global Power (USA) and the National Grid (United Kingdom) who, jointly, owned a controlling stake of 77% in the company sold off their interest to a group led by local entrepreneurs – Zambian Energy Corporation Limited (Zam-En). More importantly in 2008, CEC was listed on the Lusaka Stock Exchange, empowering thousands of Zambians, through direct and indirect ownership of CEC’s shares, including employees who were allocated 5% of the share offer.

Despite the company’s continued growth and effective strategies to explore business potential by establishing partnerships (such as the agreement with Dangote Cement) and diversifying into alternative forms of power (such as solar energy), the biggest challenges the business faces are policy related: Zambia fiscal policies, the standoff and potential liquidation of Konkola Copper Mines (KCM) which has also affected ZESCO, power shortages arising from low hydrology, and the non-renewal of the Bulk Supply Agreement (BSA) with ZESCO.

It is important to highlight that CEC has not been sitting on its laurels. The company have attempted to invest further in its own generation capacity but has been thwarted by the Government’s inability to provide the required policy framework, approvals and incentives to implement projects. Public records show that the company has invested about $3m on the potential Luapula River hydropower sites in feasibility studies with plans of generating up to 750MW of hydropower. We have heard of investment activities of over $35m in Kabompo. They led the way with the Riverside Solar PV in Kitwe which was commissioned two years ago and became the first utility-scale solar plant in the country to be connected to the national grid. Aren’t we supposed to be proud of this as a country?

The irony of the whole saga is that the mining sector, from a power supply perspective, is important for ZESCO and, therefore, one would have expected that the Government and ZESCO would be keen to negotiate and agree for a successor agreement to the BSA to progress and finalise in the next few months. CEC remains an important source of foreign currency (as it pays in dollars for the power it buys from ZESCO) for the utility company and for ensuring continued mining activity on the Copperbelt. In fact, ZESCO relies on CEC for its bankability in terms of credit facilities. More importantly, Government through ZCCM-IH owns a large stake of 24.11 percent of CEC while the Zambian Energy Corporation, which they associate with certain individuals, only owns 13.25 percent. They are clearly strangling CEC but receiving a dividend, courting new players into the industry but not supporting the existing ones. So, one wonders why the Government would “cut off their nose to spite the face” as they have a vested interest in both ZESCO and CEC. One would have thought the Government would be at the forefront of ensuring an amicable solution but instead they have been fomenting rebellion. They want to encourage private sector investment and participation in energy, yet thwart projects that would actualize that that desire and are now acting in a manner intended to strangle an existing investor.

Today, because of the key factors laid out above and the challenges CEC faces as a result of inconsistent public regulations and policies, Zambia may lose another iconic Zambian company that is fully managed by Zambians and which impacts thousands of Zambian lives. The KCM saga has created a potent mix of confusion amidst a genuine need to review the ZESCO/CEC relationship. The question is, if KCM is producing and selling copper, why are they failing to settle their dues to CEC? Where is the money going? Surely, is it not in the interest of Zambia and ZESCO that KCM pays for its power which would also be a huge boost to ZESCO particularly at this time of economic recession? We need a much more comprehensive response from the Government, and it is hoped that when Parliament is in session Members of Parliament can make queries in relation to this. Zambia cannot afford anymore politics in the mining and power sectors. We need sanity to prevail.

About the Author:
Trevor Simumba is an International Trade Economist

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