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Tuesday, January 11, 2022

Don’t Close Indeni, it Posts Dividends through IDC, it’s not a Loss-Making Company

Columns Don’t Close Indeni, it Posts Dividends through IDC, it’s not a Loss-Making...

By Dr Lubinda Haabazoka Economist, Researcher, Consultant, Academician

We have received the news with shock that the government has put Indeni on care and maintenance which is a route usually to liquidation or privatization of a company.

Many Zambians might not know what the Indeni oil refinery is, so I will give a brief overview of the plant using information available from different sources:

The petroleum refinery is described in some publications as a “very small and simple refinery”. It was constructed in 1973, with the capacity to refine 24,000 bbl/d of crude oil and process 1,200,000 tonnes (1,322,774 tons) of feedstock annually. Crude oil is imported via the Kurasini Oil Jetty in Dar es Salaam, Tanzania, and is delivered to the refinery through the 1,704 kilometers (1,059 mi) Tazama Pipeline. The annual delivery capacity of the pipeline is also the annual processing capacity of the refinery.

The Indeni Refinery is configured as a Hydro-skimming refinery. Designed in 1973, the refinery is not able to refine pure crude at commercial levels and processes spiked crude.

The products manufactured in the refinery are the result of the refining crude. Crude is primary a liquid of widely varying chemical and physical properties.

The principal element in crude is carbon and hydrogen arranged as hydrocarbons also Sulphur, hydrogen, oxygen, and water. The main products from crude are white and black products. White products contain no Sulphur, the lightest among them being LPG.
The following is the list of products extracted from crude:

  1. LPG, Butane, Light gasoline,
  2. Heavy gasoline,
  3. Reformate,
  4. Special cut kerosene,
  5. Jet A1,
  6. Industrial kerosene,
  7. Illuminating kerosene,
  8. Low Sulphur gasoil,
  9. Automotive gasoil,
  10. Fuel oil,
  11. MC30 and Bitumen.

The Plants

INDENI Plants sector comprises of five main processing units:

  1. Topping,
  2. Hydrotreater,
  3. Reforming,
  4. Vacuum
  5. Asphalt.

When the refinery was established in 1973, it was owned and managed by Indeni Petroleum Refinery Company Limited, a 50/50 joint venture between the government of Zambia and Eni, the Italian energy conglomerate, through their subsidiary Agip Zambia. Under the terms of the joint venture, Eni was responsible for the management of the refinery. In 2001, Eni sold their shareholding to Total S.A., through their subsidiary TotalFinaElf. Total took over management of the refinery. In 2009, Total S.A. sold their shareholding to the Zambian government for consideration of US$5.5 million.

Since then, there have been attempts to bring on-board a strategic partner with funding and expertise to upgrade, modernize and expand the refinery.

In 2017, the World Bank stated that the Indeni Petroleum Refinery was “inefficient and technologically unsuited for current fuel needs”. Its capacity is too small. It does not produce refinement products that larger, more efficient refineries can. For the amount of resources expended to keep it running, the government can do better towards meeting their national petroleum objectives.

In order to meet increasing petroleum products demand both nationally and regionally, there are two choices (a) build a new modern refinery that meets current and future national and regional needs or (b) expand and modernize the present refinery to improve its efficiency and output. Building a new refinery is ruled out by its cost. Rehabilitation, expansion, and modernization have been estimated at about US$500 million. As the government considers its options, the capacity at the refinery has dropped to 21,000 bbl/day. The last hope is to find a deep-pocket investor who can buy a stake in the present refinery and modernize it.

Way forward

Indeni is so intimate and important to Zambia that the decision to close cannot be arrived at it without giving citizens chance to have an input in the discussions.

Ndola before 1991 was an industrial hub of Zambia employing many Zambians. Ndola had companies like Vitafoam, Dunlop, a metal refinery among the many industries. Today, where we used to make Dunlop tires, is jacaranda mall selling imported goods.

In Livingstone for example we were making ITT Television sets. By now we would have been making plasma TVs in Livingstone with the innovative youth we have in this country. Livingstone is also a shell of itself.

Luanshya used to make the best suits in Africa that were being sold in European boutiques.

Zambia through Memaco had control over its minerals resources right there at the London Stock exchange.

In the era of energy security, Kenneth Kaunda in his wisdom decided to build Indeni because it was very cumbersome to move fuel in trucks and by rail. The logistics were not just adding up.

Now from the way industry was developed by Kaunda and his team, you could see proper planning because each province had town-forming companies. Because in 1991 we decided to erase everything that had Kaunda on it, we even sold off companies like Zambia Airways which mistake we are trying to rectify today.

You see, Indeni is not just about 300 direct employees, it’s about the entire infrastructure that was built from Dar Ed Salaam to Ndola. It’s about Sports (Indeni FC). It’s also about energy security as tanker drivers will not hold the government at ransom every time the kwacha dollar rate shifts by a ngwee. Imagine also the damage to the roads and just the cumbersome nature of moving fuel on the roads. I know tanker owners might be happy about the closure of Indeni but this is about the Zambian people.

To upgrade Indeni all we need is $500m. In August we received a gift of $1.2bn from the IMF. Why can’t we use that money for enhancing our energy security? If that money is earmarked for employing 40,000 civil servants then please engage us finance experts to advise on how we can bring on board an equity partner as has always been the case. I know the Russians are interested, the Chinese are interested, the Middle East is interested but the west is not because they want the plant to completely shut down. To shut down not only a legacy but compromise our energy security.

Zambia has experts. My appeal is that government brings us on board to advise on what to do. There are people willing to take charge of Indeni and reform it without even asking for a coin from the central government!

Indeni posts dividends through IDC so it’s not a loss-making company. Let’s not listen to those that want to lend us $1.5bn in exchange for more liquidations, privatizations, tariff hikes among other things. Zambia has the brains to turn around this country without getting any cent from abroad! We just need to be revolutionary in our thinking.

Economic liberalization they tell us doesn’t apply to them otherwise during COVID, they would not have printed trillions of dollars to give it free to their citizens. That’s communism! But why should we put our citizens in pain?

Once the oil tanker mafia takes control over fuel importations, we shall start having shortages because they will only import commodities that they deem profitable. This we saw in July when they refused to import diesel. Government business is not about profits. The government’s role in the economy is to produce a social effect. I.e create jobs, reduce prices for citizens, among other things. Indeni fuel model is the best for the country.

Please listen to us. We care that’s why we speak

23 COMMENTS

    • We don’t get advice from PF cadres, doing so would be disrespecting the many Zambians who overwhelmingly rejected the incompetent PF, there is a party that has been elected to sort out things in this country, the sweeteners that you have put in your article cannot over ride the data that we have on Indeni ranging from technical, commercial, welfare and positioning. So leave us to rule by our mandate, not interference please, by the way I just read the article by accident only to see that you were the author at the end, otherwise I was not going to read it for obvious reasons

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  1. Habazoka , you should have advised PF and lungu to spend some of those billions on the new refinery instead of on unproductive roads………..

    Indeni FC and the 300 employees are costing millions of Zambians more than what ever savings you mention ,……..

    You can’t even come up with the figures in dividends paid by indeni…….

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  2. Thank you for the insight. @Dejavu, whilst I respect your objective comments 95% of the time, you need to listen to other Zambian experts on some issues. Don’t fall into the current UPND government know it all, which is leading them to fail on basically all their promises. Dr Lubinda is right. Mother Zambia is not without people with brains to turn most of our ailing companies around. Unless we want to continue being puppets and slaves of the West where this new government is taking us through begging from the IMF and World Bank which have no interest in seeing us as a nation succeed. We should strive to listen from all Zambians however we disagree with each other sometimes.

  3. My brother habazoka don’t waste your time or energy advising those arrogant baboons..leave them to fail so that they learn a lesson. As I said, they are a one term govt

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  4. I couldn’t swallow any saliva as I read your article Lubinda. You touched all the important points necessary for the saying, “one word is enough for a wise man”. The Indeni privatization will be a grave mistake as we see the replay of the 1990s’ hh smeared privatization mess orchestrated by the evil baldheads in IMF and World bank.
    So all these trips to the US and sidelines meetings at world fora, hh chose to target one of the few remaining strategic companies. The evil in FTJ also had a brighter side of identifying key strategic national companies not for sale.

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  5. I am not surprised you are shocked . But it would be more appropriate to say you are confused. In one breath you are saying “use $500m of the $1.2 bn from the IMF received in August to upgrade Indeni”, in the next breath are saying “Let’s not listen to those that want to lend us $1.5bn in exchange for more liquidations…

    The USA, Botswana, South Africa can afford Covid subsidies. Zambia can’t. These other countries are reaping the benefits of good economic stewardship from the past. With all those titles in front of your name, you should know better.

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  6. They should have changed the name from Indeni Petroleum Refinery to Indeni Feedstock Seperator.
    Indeni cannot process crude oil in its current state,
    Investing billions of $ to upgrade it is a sheer waste of money. Better use the funds to build large strategic fuel depots in each province.
    Decommission the damn thing and just keep the fuel storage tanks.

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  7. The Hyped Hypocrite(HH) is not thinking properly. He is merely following instructions from IMF who do not mean well for Zambia except on paper.

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  8. Article by “By Dr Lubinda Haabazoka Economist, Researcher, Consultant, Academician” This fella is no longer EAZ president? Hopefully and thank goodness 🙂

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    • He has just been a way ward party functionary, we have every trust in the UPND government, the main reason why we put them in power in the first place, and now a PF cadre is trying to come in using the back door, the advice he did not give his rejected party the PF he is now trying to give it to the UPND government, why did you not pump in the 500m USD then, you want it pumped now, how

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  9. Dr. Haabazoka writes “Imagine also the damage to the roads and just the cumbersome nature of moving fuel on the roads.” If the UPND government wants to close INDENI and use Great North Road to transport fuel from Tanzania into Zambia, then it has to think of expanding that road to accommodate more traffic and avoid catastrophic accidents. Though UPND wants to lie that PF neglected Northwestern, Western and Southern Provinces in terms of infrastructure development against available evidence of comparatively more costly projects in these provinces from the Mongu-Kalabo road and bridge, Sioma bridge, Kazungula bridge. Chingola-Solwezi-Chavuma tarred road to electricity generation plants on the Kafue lower and Itezhi Tezhi, the Great North road is in most parts in a terrible state and has…

  10. …become narrower over time as it continues to lose tar on the edges. It is a nightmare when two trucks have to bypass each other from opposite directions. I was on that road in July and know how bad it is. You cannot load more fuel tankers on it without have to re-do that road. It would be courting disaster. The problem of UPND is to accept without question everything their Western funders tell them. But go to Britain or Germany, British Railways or the German Railways (Deutsche Bahn) are state enterprises. Even when they run with fewer passengers at awkward times of the evenings and are not able to make as much profit, they still continue to run. They are heavily subsidized because governments understand they provide efficient public transport to their citizens and help reduce on…

  11. … green house emissions if more citizens have to use their own motor vehicles. Even when the German railways subway train runs every evening after 22 hours with between 4-6 passengers per coach, it still passes by every station every 10 to 15 minutes. This is because they know they are there to provide a service to their own people and not merely to make profit. They understand they are able to make up for loses during peak hours.

  12. Next item on the Agenda bane. UPND have their own agenda and policies they are implementing,let INDENI go for now. Let’s now ensure those men and women who have spent years sleeping in their boots & breathing toxic gases in that company are well paid their benefits. Just pay them well and they will be solidly behind the UPND govt through and through.

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  13. What this new government must know is that they were not voted into power to come chase people from their secure jobs but enhance those jobs and make them more viable, upnd is a failed project they don’t seem to be as skilful as they pretended when they were opposing.
    Now they have retreated into their shells like a turtle.
    I don’t just understand how they could turn to be so dumb and without ideas new tangible ideas to solve the problems they picked in defeated party.

  14. Dr. Lubinda Habazoka sounds a bit reasonable for the first time and its better for the Powers Be to lend him a listening ear. Let us not dismiss anything from former Pro PF Professionals all they wanted were positions which they never got.

  15. If EAZ was a genuine organization then the government would have been engaged with it to see how the country’s economy can be revived even on points over indeni as above. Unfortunately under habazooka this organization became an appendage of PF with the leader a chief PF bootlicker/cadre so they have lost the opportunity to make any meaningful contributions.

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  16. Very funny and illogical.You failed to advise P F,what was your role then or could it be that your eyes and ears were not functioning normally,but now that’s when they have been energised.

  17. THE UPND GOVT IS NOT AS FOOLISH AS HER-BAZOOKA’S STOMACH IS BIG. HH IS AN ECONOMIST AND HAS NO TIME FOR THE BAZOOKA RUSSIAN STYLE ECONOMICS. HH WILL DEFINITELY RESUSCITATE INDENI.

  18. HH has record of privatising companies. So Indeni is one of those companies that will be privatised under New Dark Government.

    Ukuyapwila impashi. At least PF became unpopular after of years of rule. The New Dark is unpopular three months in Government.

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