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

By Edward Chisanga

You’re not African if you dispraise Africa

When writing about Africa and Africans you often must say what they want to hear in order to be on their side. If you don’t, you’re branded as Africa’s enemy even if all you’re doing is stating statistics and numbers that were not created by you but you’re simply analyzing and reporting them. While working for the United Nations, I was on missions in Africa to make presentations about its economic and trade performance. I showed statistics that highlighted that the continent’s economic trade and growth was pelting down uncontrollably. All economic and trade indicators show a sad story for the continent and was asking why. No sooner did I finish my lecture than I was confronted by angry civil servants’ audience that accused me of not being African, saying that if I were, I would not be saying negative things about my own continent. They expect nothing but self-approbation. That is in its leaders too. In Africa, no leader is told negative things even if they’re what may serve them.

Africans want to hear that Africa’s wealth will come from Africa

Most Africans want to hear that Africa can only be developed by Africans. They want to hear that trade and investment must come from Africans. They don’t want to hear that Africa and Africans have no wealth. They don’t want to hear that Africa’s development cannot come from Africa. To claim that Africa’s development will come from Africa sounds very reassuring, patriotic and African. Yet, this is nothing but self-approbation because Africa has no wealth. If it had, after almost sixty years of independence, at least one single African country excluding South Africa would have created this wealth. Some will attribute lack of creating wealth to corruption, but surely, not every African country is corrupt. Or once upon a time, no single African country was corrupt. Corruption arrived in the 1990s, long after almost every African country excluding South Africa acquired independence.

There’re others who think that Africa has wealth manifested in natural resources such as minerals, oils, forestry and others. But what is the point of having natural resources that Africans cannot convert into quality wealth? If these raw materials were wealth, and we have had them for many years, why is Africa not developing? Wealth is when raw materials are converted into manufactured goods, a skill most lacking in Africa. So, I urge these Africans to stop cheating themselves that Africa has wealth because it is nothing but self-approbation. If Africa had wealth, surely, in the last 57 years of African countries’ independence, one African country would have developed into one like in Asia, such as Thailand, Malaysia or Viet Nam. All those who think that Africa has wealth and that Africans can create wealth are simply using their heart rather than the head. The heart often remits emotions while the head remits rationality.

They want to hear that trade among Africans can create wealth

The school of thought of Africans who think that trade among African countries will create wealth for Africa are only cheating themselves because Africa’s trade is nothing but sales of sweet potatoes, raw beans, maize, unprocessed vegetables, onions, tomatoes and many other things one finds on the African market among traders. These are not things that will help Africa develop. Yet, they are largely the products likely to be lined up in intra-Africa trade of the future after the creation of the AfCFTA. We will hardly see trade in manufactured goods because most countries, in particular the majority thirty-one least developed countries have no means to produce them. What will Benin export to Zambia or Zambia to Benin apart from raw beans, copper, maize and vegetables? What will Malawi export to Senegal, Ghana or Niger? Poor countries are manipulated into thinking that the AfCFTA will create manufactured goods. Where in the world have we seen trade liberalization creating manufactured goods? Not in Europe, not in Asia. So, it will only happen in Africa? Europe and Asia first industrialized, then introduced trade liberalization to create markets for abundant goods produced.

But Africa’s wealth comes from trade with rich countries

For many years, Africa’s wealth has been created by trading with rich countries, not poor countries in Africa. For example, in 2020 Africa’s exports to outside Africa accounted for 82% of its total exports to the world leaving intra-Africa trade with only 18%. Vilferdo Pareto’s rule says, “If 80% of your results come from 20% of your efforts, it is better to spend more resources to the 20%.” In other words, a few rich countries provide more wealth for Africa from trade than the continent of fifty-five African countries. Therefore, Africa should continue to focus on trade with rich countries.

It is the same for foreign direct investment (FDI). Apart from South Africa, Africa has no FDI. DRC cannot provide FDI for Zambia. Nigeria is investing banks in African countries, but how much? No matter how much we want to assure and make ourselves happy, Africa’s wealth from FDI comes from rich countries. In Asia, you find intra-Asian FDI but it is from rich Asian countries like China, Singapore and Korea, etc. Bangladesh can hardly provide FDI for Cambodia. And most of it comes from rich countries. It doesn’t matter if a cat is white or black as long as it catches mice. If I’m getting wealth from rich countries, why would I want to resort to trade with African countries that have no wealth? Creating wealth is not about blind African solidarity which amounts more to political than economic outcomes. You create wealth from wherever you can and feed your people. For how long has Benin been trading with Ghana without creating wealth? Zambia trades with DRC but its citizens continue to be poor. Rwanda trades with Uganda but no wealth is available on the poor family’s table.

There has been a misconception that Africa’s trade with rich countries has not helped the continent to add value to exports and create wealth. That it has been lopsided in favor of rich countries obtaining raw materials from Africa to enrich themselves at our expense. What about Asia? Why has Africa not done like Asia whereby rich countries are in fact scared of the former? It has been lopsided because for almost sixty years since independence, no African country apart from South Africa trades in dynamic and more products. Some will say that rich countries are applying WTO rules to block Africa from industrializing. What about Asia?

It is not intra-Asian trade that has helped Viet Nam to overtake Africa, the whole Africa in world exports of manufactured goods. It is not intra-Asian trade that has helped Bangladesh, an Asian least developed country to overtake Africa in world exports of textiles and clothing products. Bangladesh’s main export markets are USA and EU. Even in USA where it doesn’t benefit from free market access which our continent does, it exports more than Africa. For example, in 1995 Africa’s world exports of textiles and clothing stood at $9.5 billion compared to $2.6 billion for Bangladesh as shown in Figure 1 below.

Yet by 2020, Bangladesh’s exports reached $30 billion relative to Africa’s $17.8 billion. Again, as usual, instead of debating how we can catch up, we will have some Africans making clever answers and comments to rebut this fact.

How can you promote intra-Africa trade when trade is now going to Asia?

Once upon a time, Africa’s trade was largely with the USA, Japan and the EU. Then, Africans argued that they should trade more with each other. But they did not. Instead, even at the height of the AfCFTA, they divested from the USA and are now trading more with Asia than the USA because Asia too has wealth. Yes, Africa must trade with Asia because that is where new global wealth is being created. Of course, that meanwhile is a deterrent to increasing intra-Africa trade. But who cares when you can create wealth for your people from Asia where Africa’s exports amounted to $145.0 billion in 2020 compared to only $20.0 billion to the USA and $70 billion to Africa shown in Figure 2 below?

This low intra-Africa trade will not be converted into miraculous trade and wealth simply because of the AfCFTA. It will take non-trade actions, such as developing the supply base to propel intra-Africa trade and create wealth.

And, that is a missing link which requires massive financial, human, technical, infrastructural and technological investment which Africa doesn’t have. Africans can please themselves in public statements that AfCFTA will bring structural change in Africa. If it does, Africa will be the first continent on earth where structural change was generated by trade liberalization because in Asia, it was not. Industrialization generated trade liberalization and wealth.

Even African richest businessman, Mr. Dangote has warned that wealth from the AfCFTA will only be created if Africa industrializes, not before. In fact, he is quoted as saying, “AfCFTA will fail unless African countries encourage industrialization.” He is not alone. The AfCFTA secretariat is based in Ghana. Yet, the Ghana Union of Traders’s Association is quoted as saying, “The initiative will not flourish as expected. The AfCFTA will not succeed ..it can never succeed until we have made conscious efforts to industrialize Africa.”

Stop the self-approbation and accept that Africa’s wealth will not come from Africa

In concluding, it seems appropriate to state that the money being spent on liberalizing Africa’s trade should have been spent on building production and industrialization. That is Africa’s priority in terms of using trade for poverty reduction. Poor trade doesn’t deserve financial investment to create larger markets. Why create a larger market when countries have failed to utilize smaller ones in regional economic communities (RECs), as well as larger markets in rich countries? In all these RECs, no single country except South Africa has used it to create wealth. Why? It is because member states do not have wealth to utilize trade as a tool for development. Viet Nam whose exports of manufactured goods in the world is about 2 fold higher than that of Africa needs more market access for exports. Not Africa. Africa has had free market access for many years in rich countries but failed to create wealth from them. Now it thinks that can happen when its members trade with each other. But trade what products? Please stop the self-approbation act and accept that Africa’s wealth will not come from Africa.