By Amb. Emmanuel Mwamba
PRIVATISATION 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 were in Ndola City to deliver the sombre 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 Petroluem 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 kilometres Tazama Pipeline.
Over the years, the Refinery has been modernized and expanded with five plants which comprises 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 importation of finished products.
ZESCO TARGETED
The Industrial Development Corporation( IDC) has announced plans to restructure one of Africa’s biggest utility power company- 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 $11billion 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’S TROUBLES
ZESCO limited has been.plaqued 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 is 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 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 corporatisation and commercialisation of utilities such as ZESCO.
In the case of ZESCO, the World Bank recommends the unbundling of the different services elements (generation, transmission, distribution and retail supply) and the introduction of energy sector reforms that invite 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 implement “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 sees 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 text book 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 privatisation policy.
Privatisation is the transfer of a business, industry, or service from public to private ownership and control.
It is imperative that a National Indaba gathering key stakeholders is held to atleast 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 everytime we have a new government.