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Friday, May 20, 2022

Privatization Part II Underway: ZESCO on the immediate Cards

Columns Privatization Part II Underway: ZESCO on the immediate Cards

By Amb. Emmanuel Mwamba

Minister of Finance and National Planning Hon.Situmbeko Musokotwane accompanied by Energy Minister, Hon. Peter Kapala and Minister of Information and Media, Hon. Chushi Kasanda was in Ndola City to deliver the somber news to the 327 Indeni Petroleum Refinery workers.

They will be declared redundant but will be promptly paid. After the separation package is paid, some workers may be redeployed.

INDENI is being placed on the market for sale ( the term being used, like in the 1990s is; “to be restructured). INDENI Petroleum Refinery is a national strategic industry constructed in 1973.

Crude oil or feedstock for the Refinery comes through Dar-es-Salaam, Tanzania, and is delivered to the refinery through another national strategic asset, the 1,704 kilometers Tazama Pipeline.

Over the years, the Refinery has been modernized and expanded with five plants which comprise five main processing units: Topping, Hydrotreater, Reforming, Vacuum, and Asphalt.

However, the refinery requires about $500million investment to make it into a fully-fledged refinery.

INDENI has not been operational since 2019 for various reasons including intricate forces of the cartel in the fuel sub-sector that benefit from the importation of finished products.

Zesco Limited

The Industrial Development Corporation( IDC) has announced plans to restructure one of Africa’s biggest utility power companies- ZESCO.

The IDC has published a tender in newspapers including the Daily Mail of Tuesday, January 4th 2022.

In the advert, the IDC wants to engage a Consultant who will undertake financial and operational restructuring of ZESCO.

The IDC says the Consultant should also assess the proposal to unbundle ZESCO’s main divisions such as Generation, Transmission, distribution, and Retail into separate units.

ZESCO Limited is an $11 billion company and has recently scaled up its power generation capacity after investments in new power plants that have come online including Kafue Lower Gorge and Itezhi Itezhi.

It is a vertically integrated electricity utility, which generates, transmits, distributes, and supplies electricity.

ZESCO Troubles

ZESCO Limited has been plagued by poor management and regular political interference. The Utility’s debts have reached $3.5bn ( Kafue Gorge Lower alone is $2.1billion) due to a combination of rising liabilities to Independent Power Producers (IPPs), long-running disputes with mining firms, and the exchange rate fluctuations.

Of deep concern is the poorly structured contracts with Independent Power Producers which costs the company about $40million a month.

The private investments in the energy sector are shouldered by ZESCO which underpins long-term commitments, some lasting decades, to buy fixed amounts of power at dollar-denominated prices set via power purchase agreements (PPAs) with it.

This is because power is bought at a high price while sold to consumers at far lower costs. To meet the rising debt from IPP, Government has announced that it will increase the price of electricity to be cost-reflective.

IMF/WORLD BANK The Puppeteer

The World Bank has called for the corporatization and commercialization of utilities such as ZESCO. In the case of ZESCO, the World Bank recommends the unbundling of the elements of the different services (generation, transmission, distribution, and retail supply) and the introduction of energy sector reforms that invite the entry of the private sector, alongside the creation of independent regulators.

Zambia has done some of these reforms including the creation of the Energy Regulation Board and has allowed Independent Power Producers.

IMF Deal and Economic Reforms

On 3rd December 2021, the IMF announced that it had reached a staff-level agreement with the Zambian authorities on a new arrangement under the Extended Credit Facility (ECF) for 2022-2025 in the amount of about $1.4 billion. Before the IMF Board approval, Zambia committed to implementing “bold and ambitious economic reforms” to address the severe economic and social challenges facing the country.

The terms and conditions of the “bold and ambitious economic reforms” have not been disclosed or made public to Zambians.
As in the 1990s, the IMF would not tolerate loss-making state-owned entities subsisting from the Treasury. Further as seen in the past, the IMF pushes liberal and free-market principles and reforms that they are determined to see an economy run by the private sector.

There are no sacred cows, whether the industries are deemed strategic national assets or key to the energy security of the country. Although sovereign states may not implement the textbook economic recommendations, the UPND Government being a social liberal party may find nothing sinister about this direction.

Conclusion

Although the Government of President Hakainde Hichilema has been given a five-year mandate, that mandate didn’t include the privatization policy. Privatization is the transfer of a business, industry, or service from public to private ownership and control.

It is imperative that a National Indaba gathering of key stakeholders are held to at least obtain consensus on these key national decisions that are being made for the lifetime of the country.

I have always argued that if our long-term national documents such as development and vision plans were done in a broad consultative manner, our country would enjoy policy stability as there would be no need to shift or make radical policy changes every time we have a new government.

37 COMMENTS

  1. Sometimes its wise to shut your mouth.
    What benefits do Zambians get from a bankrupt company like Zesco?
    Its never produced any financials….
    Break it up…. get rid of cadres

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  2. Mwamba admits INDENI has not operated since 2019 and needs $500 million………

    He also admits that ZESCO despite its monopoly in the Zambian market , has been a loss making entity and is saddled with debt………..

    The PF would do nothing for fear of re elections …………

    UPND and HH are different and

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  3. ……and do fear re elections but are only intrested in bettering zambia………

    The new GRZ will do anything in the best interests of the country……….

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  4. “ZESCO Limited has been plagued by poor management and regular political interference. The Utility’s debts have reached $3.5bn ( Kafue Gorge Lower alone is $2.1billion) due to a combination of rising liabilities to Independent Power Producers (IPPs), long-running disputes with mining firms, and the exchange rate fluctuations.”

    He writes this then smartly ignores why poor management has been allowed to carry on…he doesnt tell you that the board has been comprising of PF cadres like the likes of Frank Bwalya…he thinks we are stupiid. He forgets how money was borrowed left write and centre by Dora and Lazy Lungu in ZESCOs name.

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  5. Today the term “PRIVATISATION” is alarming. We have better terms such as “SPLIT” and “MAINTENANCE”.
    Splitting in itself is creating room for more shareholders especially those who only will accept a largest stake and own a control stick.
    A case of two wives. Each will need house.
    In short to continue manipulating the 2.8 they will keep ZESCO’s face and a subsidiary which in this case will be run by an investor(suspected IMF surrogate) will have a huge controlling base.

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  6. ZESCO’s current structure is inefficient and unsustainable. It has been used by previous political parties in power as a cash cow to fund party operations. This needs to be plugged by splitting ZESCO into 3 units
    1) Generation(under PPP)-managing Kariba dam, Kafue dams, Itezhi Itezhi etc
    2)Transmission(under PPP)-to manage power supply locally and the region through SA power pool
    3) Distribution(Private ownership by Zambians)- Lusaka Energy Supply , Luapula Energy Supply, Muchinga Energy Supply , CEC etc

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  7. The proposed unbundling of ZESCO will just compound more misery for the consumer especially the DOMESTIC ONE, AS ALL OPERATIONAL COST OF EACH BUNDLED ENTITY will be passed on to end USER ( Consumer). We should brace for more Tariff Hikes. Currently the company because it’s big enjoys and benefits from Economics “Economies of scale”. When it comes to complaints/faults by the consumer, it will be blame game. NO its retail, no its distribution, Transmission or Generation as each will be independent of each other
    What is required is to reorganize the company by cutting costs internally so that units/departments operations are unique and relevant to its operations.

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  8. CONTINUED
    Efficiency does not necessary happen or come by dismantling a company as STRATEGIC as ZESCO. OH CRIED MY BELOVED ZAMBIA slowly losing our sovereignty. Which one next? Is it NAPSA, ZAFFICO, MOPANI, KCM. ZANACO etc., etc.
    My only appeal to GRZ is for at least ZESCO to retain “GENERATION” unit. However, since it’s already an IMF deal and done. “HISTORY IS THE MERCILESSILY JUDGE IS OF ONE’S MISDEEDS AND I BELIEVE WILL AS WELL “JUDGE” THE “CURRENT CROP OF DESCION MAKERS HASHILY”

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  9. The UPND praise singers who were either in mummy’s nappies or not yet conceived during the privatization part I of the 1990s think privatization is good under any circumstances and will bring good fortunes to the country. Just check why the majority of copper mines in Chile are still controlled by the state (Codelco), why Deutsche Bahn or German Railways is still a state enterprise or Debswana Diamond Company is owned in equal shares by government and the Debeers Group, why the major Chinese CNOCC oil Company is still state-owned. Ask yourself further why the Chinese CNOCC oil Company’s bid for US oil company UNOCAL was thwarted by a ferocity of political opposition within the US Congress in 2016. Was it not because the bid was posited as a Chinese economic strategy aimed at…

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  10. … threatening US national security? How guaranteed is Zambian national security when we begin to privatize INDECO and ZESCO? Can a steady power and oil supply to Zambia in difficult times be assured in case of future differences with the new prospective private owners?

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  11. Mwamba is still hinding PF failures, although, I commend him for having shown a level of acceptance that both INDENI and ZESCO were failed projects under PF.
    I have no problem with regards to INDABA, for as long as its NOT going to be used by PF to “ride on” current GRZ successes. BTW, What is it that PF will bring to the table that they did NOT do during their 10 years rein ? The INDABA should involve Subject Matter Experts

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  12. We shall not allow or accept any form of privatization….We tried it in the 1993-1998 it resulted in misery….. Zambians it’s stand and defend what is ours if hichilema loves is nation like he claims he must not sale Zesco

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  13. All of a sudden Emmanuel Mwamba’s eyes now can “see” the same things he couldn’t see or utter a word when he was part of the administration that looted Zambia & left it bleeding… that PF … party of thieves!

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  14. This is what opposing without brains looks like. Everywhere in the world, even in Communist countries, they distinguish between generation, transmission and distribution of electricity. ZESCO is a loss making monolith surviving on bleeding the taxpayer. You either privatise some parts, especially distribution to companies like CEC which make profits and contribute to the treasury through corporate tax or you keep pouring money into a pocket full of holes.

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  15. Zesco is not a failed project and cannot be a failed project because the demand for electricity is forever, Let us learn from our mistakes and be positive about correcting our mistakes. IMF is supervising us because we are showing them that we are useless. Unbundling Zesco is attractive to Thieves. Zambians need to understand that whoever will buy Zesco will always have alternatives in which to invest his money. He can dump Zesco anytime but Zambians will always need Zesco and cannot do without Zesco.

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  16. All of a sudden PF cadres like Mwamba are prescribing all forms of prescriptions to the New Dawn Gov… why did they not advise their great leader ECL against grand corruption and the general trashing of our beloved country ?? Please let the real leaders clean up the mess you left behind,that is why PF was booted out by the Zambian voters… the people are in full support of the tough measures Bally and his team are taking and they were ready for this phase.To get well when you are sick,you have to swallow the bitter pills….let them work please.

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  17. The Biggest Asset Zambia has to change its economics in the region and global is Zesco and it’s installed capacity It’s a national Asset critical to the fortunes of the economy It cannot be privatised or unbundled to loose it’s synergic vertical integration which have worked in complementary it has also core the critical human resource that have been underutilised or given little initiative to growth and develop all sectors of the energy like storage or control areas Though there is need to review and look at the stratergies and risks in the Stratergic plans, Operational,Financial including now some Technological risks because of energy transitions. It should not be a case of Privatisation or unbundling because then that will be wrong but even then your Transformation stratergies must…

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  18. Today, contributors are more civil with their commentaries. And we leave it to individuals with knowledge on the matter to elaborate more so we can learn. Otherwise Happy New Year LT team.

  19. ZESCO was supposed to restructure and rationalise by cutting the head count which had become bloated. Instead, they become greedy and kept increasing tariffs and got overpaid over time. Thanks to technology we have solar power and this Ponzi scheme Called ZESCO is unwinding.

    This Mwamba had the opportunity to tell his boss Lungu. If these were issues why did they choose to sweep them under the carpet? Information is only useful if it is provided at the right time. Wrong timing and to wrong people.

  20. We warned you that the koswe will sampwisha you.
    Welcome back to h² and his insatiable appetite to privatize the country. At the end of his presidency all gullible Zambians who voted for him will learn his signature name as the chief privatization nigga.
    It is extremely difficult to repossess a privatized company out’a white niggaz. The time to put the foot down is now that is if you can stand. See the comments from diaspora goons. Chaps careless what you go through with issues in the country.
    IMF and h² are one. All corporate niggaz wishing to fill their pockets. IMF is rulling this country.
    Wake Zambians and fight for your assets before its too late. Be conservative!

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  21. Stratergies must result in the company to achieve Stratergic,Operational,financial and Technological and human skill flexibility Transformative stratergies must not result in further losses and problems as seen in other ultilities near The sector is still in the wire and pole business and needs to be creatively transformed to create further employment and opportunities for those small numbers around the troubled utility I think those projects that will add revenues and increase the capex for the ultility needs also to continue The smart intelligent malambo man needs to be given the opportunity to lead and creatively so The critical is the Financial restructuring and Gov can save the country more by taking initiatives that will retain and transform the ultility

  22. What a bargain of that vote.
    Unfortunately no candidate campaigned on the premise of privatization of national assets. He didn’t talk about it except for fixing the economy. Who does that? Puting the country on the outlight path of privatization and all outspoken niggaz like Oliver Saasa, Chibamba Kanyama, Yusif Dodier and the likes watch from the terraces. Thanks to people and patriots like Emmanuel and the Haabazokas of this world.
    We now learn he is bent at privatization for a piece or morsel of IMF money.
    Last time we checked our mines were gone and we struggled to assert our authority over them.

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  23. Sleep Walker – If you knew VJs history you wouldn’t ask that question …really laughable …do you know what methaqualone is or in short mandrax? or his charming womanising ways remember Tshala Muana. Anyway dont bother with this clown Mwamba he loves clinging on to titles as he is a crook …its only in Zambia where they call someone who is no longer at Foreign Ministry ambassador.

  24. This Thorn in the A$$ – Why do you think those people you named are observing and empty tins like Mwamba are making noise?

  25. Zesco is a failed state. No investor will show any interest in any of the proposed three sections (generation, transport, distribution) unless all debts have been taken care of and government provides a 100% guarantee. Mean time the grid is in a sorry state and needs millions and millions to get fixed. I’m so happy I got solar seven years ago!

  26. ZESCO management can be modernized without privatization. We cannot be a nation which controls nothing but taxation only.

  27. Generation will generate power and sell it to transmission at a profit. Transmission equally will transmit at a profit. Distribution will do it at a profit. Thus the consumer in Wusakile will buy units at K200 for 100 units

  28. Eeeee eee ee iwe ka 28 ka 1d10+ ka nigga Tarino. Stay the f*** out’a my comment if what you have is foul language. Stick it out! Sha! Kupusa bati!

  29. Eeeee eee ee iwe ka 28 ka 1d10+ ka nigga Tarino. Stay the f*** out’a my comment if what you have is foul language. Stick it out! Sha! Kupusa bati!
    Tebange ili?

  30. So many commenters but non has bothered to look at zesco financial statements. Politicians are not financiers. Investors invest only when they expect profits. The case of disbanding zesco will not profit government or Zambians but Investors who will in turn report losses and not pay tax as it has been the case with the mines. I say government should invest(bailout) in zesco (and Indeni) but not private sector in order to safeguard power generation and security for the country

  31. ZESCO is not a loss making company. What has made ZESCO a loss making company is the government in power that siphons the money out of ZESCO, lack of political will to increase generation and upgrade transmission networks whenever ZESCO has earned money from power exports, employs too many engineers. Not more than 5% of engineers employed by ZESCO do engineering jobs, the remaining do technician or journeyman jobs, and are paid engineer salary. ZESCO pay engineers who do not do engineering jobs, engineer salary for having a paper qualification. Such engineers are suppose to be paid for the job they do. Same job same pay. Working culture is very poor. Working culture is like that of City of Lusaka Council which cannot make money to pay for its workers. These are the main reason which…

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