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ZESCO and CEC have a symbiotic and synergistic relationship

[By Eng. Geoffrey Chishimba Chiyumbe]

“No matter how nimble, innovative, or globally networked your organization or business is, it will run smack into the limits of its capabilities just by virtue of operating in today’s dynamic world. To push through these limits, you need to tap into a nearly bottomless force of adaptability known as symbiosis.” I also remembered that in business, finding your niche is an important step in building and growing a successful business.

Organisms occupy what are called niches. These include the physical space in which they live, how they use the resources that are in that space, and how they interact with other organisms in that space. The interaction among organisms within or between overlapping niches can be characterised into five types of relationships: competition, predation, commensalism, parasitism and mutualism. Symbiosis refers to a close relationship in which one or both organisms obtain a benefit.

Every functioning electricity sector has players acting upon its different sub-sectors. In Zambia, the main actors are the state-owned ZESCO Limited, and the following private entities: Copperbelt Energy Corporation Plc (CEC), Lunsemfwa Hydro Power Company, Itezhi-Tezhi Power Corporation Limited, Ndola Energy Company Limited and Maamba Collieries Limited.

The Zambian Electricity Supply Industry (the ESI) is a regulated environment where any undertaking in electricity generation, transmission, distribution and supply must be duly licensed by the Energy Regulation Board (ERB),
CEC owns, maintains and operates a vast network of power transmission and distribution infrastructure covering the entire Copperbelt Province and has an embedded thermal electricity generation capacity of 80MW, which is used for emergency power supply, as an added value service to its customers, and for voltage management. The transmission and distribution segments have two key players namely CEC and ZESCO, with CEC responsible for bulk transmission and distribution to the mines on the Copperbelt. It has more than 60 years of supplying power to the mines with over 1,000 kilometers of 220kV and 66kV transmission lines, including amongst other assets, 42 high voltage substations and dedicated control centre. The company transports (transmits) electricity for ZESCO on the Copperbelt and undertakes international wheeling or transportation of power for ZESCO and other utilities in the region, using its interconnection with the DRC. CEC co-owns the interconnector with SNEL, the DRC’s national power utility. The Bulk Supply Agreement (BSA) is presently the contract that governs the formal business relationship between CEC and ZESCO covering technical, commercial and legal aspects.

It is worth noting here that neither entity has ever owned the other. CEC and ZESCO have always existed as two separate companies or legal establishments, fully independent of each other, with CEC having been incorporated very early in the 1950s and servicing mining companies by 1953 before Zesco existed. ZESCO was to be established later.

The BSA with CEC was poorly negotiated on the part of Zesco. It gave an “exclusive franchise” to CEC to supply power on the Copperbelt for all mining and mining related activities. This exclusivity is very restrictive and made CEC a monopoly on the Copperbelt. The other downside was the exclusivity given to Zesco alone and only to supply all the power required by CEC. It is dictatorship in the business environment since it did not allow the participation of other potential IPPs in the electricity supply industry.

Zesco engages CEC for tariff reviews to cost reflective levels and apply to ERB for regulatory approval of the agreed tariffs arising from such negotiations as per mutually agreed timeframes. Some reasons Zesco advances for increasing the tariff include increase in inflation; Depreciation of kwacha against the US dollar; Increase in the cost of machinery and equipment used in the electricity industry; and Capital requirements to fund generation projects, transmission and distribution infrastructure.

Do we have the right people in Zesco with contract negotiation skills to do proper contract negotiations that benefit Zambians? Such levels of engagement call for ultra-negotiators who are fluent in and love negotiating. Negotiate with economic fundamentals such as exchange rate fluctuations on the table. Professionals that go in with a strategy and are able to play a reluctant party role the moment the environment demands such. Are these processes conducted with professional excellence, diligence, integrity, transparency and accountability and credibility, and not susceptible to vices such as corruption? Is there any element of political influence to favour the private sector party to the agreement and rendering the technocrats ineffective because they are politically compromised?

Zesco is poorly governed and managed and technically insolvent not because the tariffs are not cost reflective. Are the tariffs for the power sold to the mines not cost reflective, where Zesco sales 70 per cent of its total generation capacity? The remaining 30 per cent to the domestic and commercial market could actually be treated as a social responsibility contribution toward the Zambian citizens if only it is professionally governed and managed as a business entity with a social flare or character, with full support from the political players without being abused and not fully interfered with.

Since the assets belong to CEC, Zesco will have no option but to negotiate with CEC to use their infrastructure for Zesco to wheel power from its generating plants to the clients. In which case CEC will charge what is called the wheeling charge – Transport fare – on Zesco. Otherwise how is Zesco in its current state of financial incapacitation going to transport its power from its generating stations to the mines without using the existing CEC infrastructure? Does Zesco plan to obliterate CEC completely from the picture? Eliminating CEC completely from the equation will entail massive job losses on the Copperbelt and loss of revenue for ZRA amongst other things. The current inefficiencies at Zesco in its present state will then be transferred and introduced to the energy – sensitive mining sector. This move would also be against the current government policy to attract private sector participation in the energy industry. We don’t want one day to wake up and find the entire Copperbelt Province including the mines plunged into total darkness. Such would be very irresponsible for all parties involved and we would treat it as a crime against humanity, as it would cripple the already limping Zambia’ s economy which is mainly driven by the Copperbelt with the mines providing the biggest portion of the much needed foreign exchange and a major revenue contributor.

Going forward the relationship between Zesco and CEC is nothing but mutually symbiotic and synergistic. It is an antibiotic relationship – analogous to the effects of two drugs working together where one drug increases the other’s effectiveness. It is an obligate relationship where no one can survive without the other. This cannot be avoided. Government through Zesco must sit down and reassess the agreement, get back to the discussion table with CEC and renegotiate. This must be done in the interest of the Zambian citizens and not to benefit few selfish individuals. Zambia first before self. No need for any party to be arrogant or act out of naivety.
We could have avoided all these debates if only government had put in place the implementation team that was going to execute cabinet approved recommendations made by the energy sector reforms task force which President Edgar Lungu had appointed. These are well honed Zambian industry experts from private and public sector who did a thorough diagnostic review of the energy sector challenges and were ready to carry out the implementations which included amongst others this issue of BSA. Abraham Lincoln said, “I do not think much of a man who is not wiser today than he was yesterday.” It is not yet late.

Nelson Mandela said, “Fools multiply when wise men are silent.” We have spoken.

The writer is a Zambian UNZA graduate, Professional Electrical Engineer, Energy Consultant and Project Management Specialist with over 24 years post qualifying experience in the energy sector from Zambia and South Africa. Had worked for ZCCM, Zesco and was Power Advisor to PwC on the restructuring of CEC. Currently working as Country Director for Eskom consulting subsidiary. Contact +260976840325 and email: chiyumbegc@gmail.com

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