By Patson Chilemba
Former Zesco board chairman Dr Mbita Chitala says he refused to have Zesco used as a source of illicit funds from a public enterprise to pay for bloated salaries at the Industrial Development Corporation (IDC).
In his book Corporate Capture, the Political Economy of Electricity Management in Zambia 2014-2021, (How Not to Manage a State Enterprise), first obtained by Daily Revelation, Dr Chitala stated that an attempt was made to compel Zesco to pay management fees to the IDC, saying he was aware from the time he and his fellow board members were appointed that government would be controlling and regulating the operations, management and overall performance of Zesco, and that the control and regulation would be through a complex framework of agencies spread across the wide spectrum of the Zambian government.
He stated that the Public and Finance Management Act Number 1 of 2018 was meant to control and regulate state corporations, and provided for the role of the presidency, the parent Ministry, the Treasury, the Board of Directors, the Auditor General and the Legislature.
Dr Chitala stated that the Act did not however provide for the powers of the IDC, saying the lawful way should have been either the amendment of the Act to include the IDC or the Minister of Finance to publish and gazette a Statutory instrument delegating his powers of controlling public enterprises to the IDC.
“This was never done and all actions of the IDC were therefore unlawful from the beginning. This is what made the relationship between me and the IDC unpalatable as I persuaded my colleagues on the ZESCO board to decline to implement several of the IDC management instructions on grounds of illegality,” he stated.
Dr Chitala stated that the justification of having this kind of complex network of institutions controlling public enterprises in Zambia lay in the fact that public enterprises like ZESCO were public investments which had to be subjected to public scrutiny to ensure that they were, as for ZESCO, able to perform the important public function of generating, transmitting and distributing electricity to the wide populace of Zambia.
“This section of the book provides instances where I as Chairman and supported by the Board of Directors and management found it difficult to obey the many instructions sent to me by the IDC and this was used to persuade the to relieve me of my appointment as Chairman and member of the Board of Directors,” Dr Chitala stated. “The first instance was the ZESCO refusal to accept the IDC instruction for ZESCO Limited to start paying IDC management fees.”
He stated that on November 18, 2019 IDC chief executive officer Mateyo Kalaba informed him that from January 01, 2020 IDC was going to implement management fees oversight and other management services allegedly provided by Zesco.
Dr Chitala stated that part of Kaluba’s letter included that management fees would be charged on a computer cost recovery basis using a flat monthly rate; that IDC will enter into management services agreement with each subsidiary, and that each contract will specify the scope of management services to be provided by IDC and the applicable management fees. The letter was indicated that each month, the IDC will invoice subsidiaries, and that payment by subsidiaries are to be paid by the 20th of every month for management services to be provided during that month.
Dr Chitala also stated that Kaluba indicated that the budget of all subsidiaries should provide for the management fees beginning January 01, 2020.
However, Dr Chitala argued that it was not stated in the law how the IDC was going to make money, and it could only be assumed that the Minister of Finance would provide for that using an appropriate law.
“Ordinarily, the IDC could make money when the companies they owned made money. They could either sell their shares in any business for profit or if the subsidiary paid dividends, the IDC as a shareholding company would, with the authority of the Minister of Finance, receive cash dividends that it could then use to pay salaries and for other investments,” Dr Chitala stated, saying that was his understanding of the role of IDC in the absence of a statutory direction by the Minister of Finance pursuant to the Minister of Finance (Incorporation) Act.
“On the grounds of my interpretation, I advised the ZESCO management to ignore the IDC directive as I considered what the IDC were proposing was simply unlawful way of attempting to use ZESCO as a cash cow. This refusal to pay management fees were also anchored on the fact that ZESCO was in reality an insolvent entity and any payment of fees would reduce its capital base,” stated Dr Chitala. “This refusal by ZESCO to pay management fees to IDC was not well received by the bureaucrats at the IDC as this blocked their source of illicit funds from a public enterprise to pay for their bloated salaries.”
