By Merlyn Mwanza
Dr Mbita Chitala says the government of former president Edgar Lungu recognised that cost reflective tariffs would take some time to be attained in Zambia, and that “as a responsible government, it would be imperative to continue subsisiding consumers.”
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 when he became chairman of Zesco, the government of president Lungu’s position on the structure of the electricity industry was that the company continued to operate on the lines of commercialisation as a vertically integrated company.
He stated that the government at the time observed that privatisation of Zesco would not be in the national security interest and cited reasons for adopting a policy of commercialising Zesco.
Among the reasons cited was that the size of the electricity system in Zambia was too small to be unbundled, and that the Bulk Supply Agreement (BSA) between Zesco and CEC up to March, 2020 which committed over 50 percent of the Zesco generated electricity to CEC meant that the company was already unbundled.
“The government recognised the high poverty level in the country and noted that the cost reflective tariffs would take some time to be attained in Zambia. As a responsible government, it would be imperative to continue subsidizing consumers with life tariffs,” he stated.
Dr Chitala stated that the government feared that retirement of workers would ensue if Zesco was privatized as had been the case with earliest privatisation, and that the electricity energy was essentially for most developing countries a public good that is the engine for growth, development and poverty reduction, and that privatisation would compromise this rational development agenda.
He further stated that the government noted that privatisation would prevent the government policy of electrifying the rural areas, as the government in 2003 had established the Rural Electrification Agency (REA) to spearhead this policy, that unlike Zesco, the ERA was able to receive grants which it used to construct electricity networks in rural areas and since the REA had not capacity to manage these assets, it transferred the infrastructure to Zesco for operation and maintenance, saying privatisation would kill this initiative.
He stated that the policy when Lungu took over in 2015 therefore required that the government make statutory changes to the work of Zesco and the ERB.
“The ZESCO’s Articles of Association were changed which resulted in changes to the composition of the ZESCO Board. This was aimed at insulating ZESCO and its Board of Directors from political interference and improve its commercial operations,” Dr Chitala stated. “Furthermore, the Energy Regulation Act was amanded which amendments provided more independence to the ERB as regulator and allowed ZESCO to partner with private investors. As a result of the above changes, ZESCO’s performance between 2011 and 2014 improved in some indicators.”
However, Dr Chitala stated that it has become evident that the commercialisation strategy have not led to the improvement in ZESCO’s financial and operating performance as shown in his book on account of several challenges least being its indebtedness to IPPs and its bad business relationship with the CEC.
And Dr Chitala has further indicated why Margaret Mwanakatwe was fired as Finance minister and why the late Dr Roland Msiska was removed as Secretary to the Cabinet by former president Lungu, stating that they both supported the unbundling of Zesco, despite pleas that this be made after consulting Zesco’s creditors, particularly the huge loan portfolio from China.
He stated that the duos position triggered adverse action from the Chinese lenders who stopped disbursing their money on the projects and the projects momentarily stalled.
Dr Chitala stated that after Zesco pleaded with the leaders which pleas were ignored, they requested State House to assist and also pleaded with Dr Msiska, to immediately intervene by engaging with respective officials from China so that the lenders could continue supporting the projects instead of stalling or abandoning them, a position they had taken particularly the US$1.2 billion Kafue Gorge Lower projects.
“The Chinese creditors only resumed their loan disbursements after the two government t officials were disciplined by the President who retired them from their portfolios. Dr. Msiska was assigned to a new portfolio that was working on atomic energy while Mrs. Mwanakatwe was removed from the Ministry of Finance,” stated Dr Chitala, however, adding that the attempt to interfere with the professional management of Zesco did not end with the dismissal of the two, but continued and was exhibited by the conduct of officials from the Industrial Development Corporation (IDC).
More @ www.dailyrevelationzambia.com
