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Monday, May 23, 2022

Privatisation – Deconstructing the myth, lies and truth

Columns Privatisation – Deconstructing the myth, lies and truth

By Chimwemwe Mwanza

The new year is still in infancy yet the disinformation mill across Zambia’s political divide is already in overdrive showing no signs of abating.

Despite the copious amounts of information dominating our discourse, truth is in short supply. As the adage goes, lies have short legs and often carry punitive consequences once uncovered. This old-age aphorism provides the biggest incentive for truth yet politicians serving in both government and the opposition and who supposedly carry a weightier responsibility to truth still feel no compunction for lying.

This reminds of Amilcar Cabral – that doyen of sound leadership whose caution to his peers still finds resonance in contemporary politics. ‘Tell no lies and claim no easy victories,’ was his refrain. Straight to the point, why is Information Minister Chushi Kasanda trying to hoodwink the public to believing that the so-called unbundling or rationalisation of state-owned entities is nothing but an exercise in futility? Far from it, this process has an endgame.

Call it by any other name, privatisation is back. If the state has its way, Zesco and Indeni will soon be on the chopping block in readiness for sale to interested equity partners. Konkola Copper Mines (KCM) will follow suit and so too will Mopani Copper Mines (MCM) among a raft of other ailing parastatals. It’s troubling then that government is failing and lamentably so to articulate a concise position ceding the high moral ground to scaremongers. Is there reason then for government’s spirited attempt to spin the obvious?

Why is the government obfuscating facts?

It’s true that Zambia’s electorate abhors privatisation cited for eroding the country’s industrial base which in turn resulted in extensive job losses in the early 90’s. Today, odors of unemployment, and poverty characterise most towns on the Copperbelt – once the country’s manufacturing hub. Against the temptation to pronounce on his complicit or innocence there-off, it’s indisputable that the ghost of privatisation and alleged profiteering from sale of state entities still haunt the incumbent President.

This may well explain the state’s lackadaisical approach to facts on the fate of these firms. To what extent then is buttressing the truth helping government? You wonder. The steady erosion in public trust on this issue is largely the result of a yawning gap for truth. This has also created a window for perceptions to fester. Don’t forget. In politics, perceptions equate to reality. It shouldn’t, therefore, surprise if speculations of possible ill-motive or corruption begin to circle this process.

The painful reality though is that these moribund parastatals require fixing. And Finance Minister, Situmbeko Musokotwane ought to be forthright; perhaps he should assume a lead role in communicating the rationale behind the imminent sale of these firms. There is no need to defend the indefensible. A spade is a spade and can’t be called a big spoon by any stretch of imagination.

Some questions. Other than rubbishing a process that could potentially save these companies, have critics thoroughly interrogated the rationale for privatisation or are they merely opposed to the process because a much-maligned global financial lender has asked the state to reign in on these companies’ financial drain to the fiscus?

And so what if the sale of these entities is being instigated by the International Monetary Fund (IMF) as a conformity to the recently signed staff level agreement (SLA). Is it not fact that Zesco, Indeni, KCM and MCM can’t function without cash injections from the state? How sustainable is it for the state to keep pumping money into bottomless pits? Isn’t this hostility a classic example of shooting the messenger and not the message.

The case for privatising Zesco

Paradoxically, critics of the sale of these firms served in previous governments yet failed to provide tangible solutions to save these companies. Truth is that fundamentals on the demand and supply side have changed. As such, Zesco’s nearly 40-year-old business model in which the power utility owns the entire value chain from generation, transmission and distribution is obsolete.

Forget load-shedding, the generation side of its business is battling to meet demand and even when it has excess capacity from independent producers such as Maamba Collieries, its grid suffering from years of neglect is incapable of carrying excess load. For long, Zesco’s inefficiency has impeded economic development. Is there value in sustaining a monopoly that can barely keep the lights on?

Splitting this company into three independent firms which would be generation, transmission and distribution with the state maintaining a majority stake in each of the new entities is worthy a consideration. Laden with massive debt, this firm is in desperate need of recapitalisation which can only be offered by new investors. Unbundling Zesco will also create competition and allow for new players including those in the renewable energy space to enter the market. Need we explain more?

Hand back KCM to Vedanta

What purpose has the liquidation of this company served except to decimate more jobs in a town battling severe unemployment? Government should simply hand back the company to its rightful owners and negotiate a new service level agreement (SLA). Vedanta may have breached contractual obligations but the state has no right to appropriate an asset that was rightly paid for by an investor. There is no better opportunity than now for government to re-engage Vedanta on fresh terms. Aside from a few controversies that have dogged the company over the years, Vedanta has some of the best run mining entities spread across the globe – all the state requires is to enforce a win-win SLA.

Sell Mopani

The prognosis for MCM looks dire which perhaps explains why its majority shareholder Glencore opted to flee this investment after depleting much of the company’s ore body at the Nkana and Mufulira mines. The remnant ores at the two mines, occur at great depth and is too costly to extract. At Mufulira mine alone an unavoidable investment of US$300 million is required to continue with operations.

Against competing needs of the public, does the state have the luxury of spending such money on a single mine? Even a zero-tax rate demanded by mining houses won’t wash away MCM’s liquidity crisis. A similar situation pertains at KCM’s Konkola mine (ore at Nchanga is virtually exhausted). The less written about Indeni the better.

So why should the government keep such cash guzzlers in its fold instead of selling them to investors that are willing to sweat and turn these assets to profitability?

Mwanza is an avid reader of politics and philosophy. A supporter of Liverpool FC and Kabwe Warriors, he now enjoys goat meat. Best wishes of 2022 to you LT bloggers. For feedback, email [email protected]

17 COMMENTS

  1. Ba Mwanza, ala muleikala fye. We are not children. Chiluba sang this privatisation song to us and see where it left us.
    You are back again singing the same song? What benefits has privatisation of the mines brought to zambians? We have made foreigners dollar billionaires while Zambia is left scrounging for loans from IMF.
    Please spare us. Why are we always cheated by politicians as zambians?

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  2. With energy in the form of water falling from height, we cannot generate, transport and distribute electricity. We can. PF doubled electricity generation from about 1500MW to about 3000MW. Mwanza give considerations to Zambians, we can no longer be cheated.

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  3. Is it privatisation that led to de-industrialization in Zambia? But even private companies that were in manufacturing in Zambia also closed. High interest rates of more than 100% per annum de-industrialized Zambia and not privatisation.

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  4. Mwanza, how old were you in 1991? Privatization brought about all the misery Zambia is going through today. It did not only affect companies but households as well – Spouses were privatized, children were liberalized and dependents pruned (No more extended families) hence the mushrooming of street kids something that was never heard of in the first Republic and before.

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  5. continued
    As for recapitalization, AS AN EXAMPLE, Glencore operated for more than 20 years in the country as a “GOING CONCERN “with Government having a stake through ZCCM HI, but never declared any dividend to GRZ BUT only declaring lose after lose each year yet you are saying Nkana and Mufulira need recapitalization today and its hardly less than EIGHT months from the time they pulled out. Its similar story for KCM which was sold from our own money. Sadly no one is asking questions about how it was sold? DEC, ACC, FIC and POLICE where are you since you are on record to pursue and investigate old cases
    As for ZESCO, PF despite their own shortcoming did increase the GENERATION capacity compared to MMD.

  6. continued
    UPND let the new players who want to enter the ENERGY sector start from the scratch by setting up Hydro Power stations along LUAPULA RIVER and Lower Zambezi and or set up GREEN ENERGY POWER, e.g. SOLAR PLANTS

  7. I wonder why we overate Privatization. Can anybody please give me the name of a company that was privatized and went on to create sustainable employment, part from Zambia Sugar. All the Mines that have created large employment are the green field mines like Lumwana. All the other companies privatized have not created employment in numbers that their former sellves created.

    Personally, I don’t see any value in privatization. Just open up the competition. Let the investors come and setup their own companies from the ground up. If Lumwana Mine did it , why can’t they did it. Leave our public utilities and mines a lone please. Come and build your own like phone companies have done.

  8. @ 11 Chanda. All the companies HH bought are profitable…..kikiki. We have millionaires in Zambia, let them get organised and invest big. Let’s privatise to ourselves, that’s it.

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  9. The trouble with aspiring to emulate privatisation practiced by developed countries, is that, unlike their expertise at sniffing-out malpractice & deception, we, as a nation, are not savvy with white-collar deception, nor do we have appropriately trained people that can unravel the multitudes of mechanics crafty investors might apply to swindle us! At this rate, we will never extract the most possible profit from privatisation. Investors will come, take all & disappear – yet we still will be saddled with debt! We are not enlightened enough to handle international privatisation; hence history will keep repeating itself! Slow down, & reconsider!

    #plant a tree please!

  10. Chanda @11, Zambia still has a number of state-owned enterprises. Where are the jobs they’re providing to ensure that most young people looking for work can find it? Are these state-owned enterprises growing and expanding? And what taxes are they paying to government?

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  11. Mr Mwanza your journalism is still in its infancy just like 2022. Your dad was an accomplished journalist. Research a bit more before you put pen to paper. Mention by name which former ZCCM Mine was privatised by HH. My dad worked for ZCCM for 31 years, I was born and brought up in Chamboli, when Ka Chiluba was privatising the mines I was alive and still I am. You have believed empty Pf lies. Nemwine above is right, private companies collapsed too, such as FURNCOZ, CENTURY HOLDINGS, COPPER HARVEST, BONAR COLWYN ETC. Please check and counter check your facts with elders who were there before misleading you readers.

  12. By the way Zamtel was nationalised by Sata, talk to any worker from there they will tell you the company is on life support in the ICU financially and Infrastructure wise.

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