ECONOMIST Trevor Simumba has charged that the government has embroiled itself in the CEC-Zesco impasse because it wants to solve a business problem with politics.
Simumba says it is a lie for Zesco to claim that it had been making losses due to the expired bulk supply agreement with Copperbelt Energy Corporation.
He charged that the “expropriation” of CEC infrastructure by government through a statutory instrument would weaken the government’s bargaining power when it sits to negotiate for the management of international debts and Eurobonds with international lenders such as the International Monetary Fund.
Minister of Energy Mathew Nkhuwa declared CEC lines common carriers through SI. 57 of 2020 which allows Zesco to supply power to its clients using CEC lines at a fee to be dictated by the Energy Regulation Board – a move that has widely been condemned by both local and international
commentators, mostly experts in the energy, mining and economic sectors.
The experts have questioned the safety of private investments and businesses under Zambia’s current political dispensation.
Simumba said in an interview that Nkhuwa should put in writing his pronouncements last week that all electricity lines in the country are common carriers so that other players like Maamba Collieries and CEC can also use Zesco infrastructure to export power to their clients under the same terms that have applied on the CEC infrastructure.
“That’s a lie, a total lie. How does Zesco make a loss because of CEC, how, when CEC accounts for 50 per cent of Zesco’s power generation? And CEC was paying Zesco in foreign exchange not in kwacha. It’s a lie. And these are things that we have to call out. Such issues must be called out for what they are. It’s a lie. What’s needed is a commercial agreement. Yes…Zesco can say we have been selling to you power for 20 years at a specific [rate], Zesco has a right to say, I think we should increase it. But you have to look at the whole chain, if Zesco increases. It means electricity price to the mines also increases, how that relates to the cost of production?” Simumba argued.
He said it was not too late for Zesco, CEC and the government to sit around the table and renegotiate a new BS.
Simumba said in doing so, a team of government experts from the Ministry of Energy and Bank of Zambia must be involved and not politicians adding that the government should just mediate the process that should be commercially acceptable to both parties.
“That’s why I am saying, when you sit around the table, you have got all the facts you can come to a conclusion. It’s business, every business is negotiation. But we have a problem because they are trying to solve a business problem with politics… Taking over CEC infrastructure and directing that ERB will dictate the price is killing CEC and that’s the unfairness we are talking about. The lack of having systems in place where you just make decisions on the whim without getting the impact it is having,” he said.
“More importantly, this is expropriation, it’s just that they are not calling it that. But it’s expropriation of property that belong to a private company, a Zambian company which has more than 3,000 Zambian shareholders. You are basically bringing that company down and killing it and it basically doesn’t make sense. So killing CEC is going to have a big impact on the copper mining industry which is our number one foreign exchange earner. So you have mines like Mopani, KCM that cannot function without electricity. These mines that mine underground, KCM has to pump out water all the time and that takes electricity and that’s why KCM is owing a lot of money to CEC. So it sends a very negative signal and I think the government should sit down around the table with CEC, Zesco and KCM to resolve the debt issue.”
Simumba said secondly, the should come up with a new bulk supplying agreement so that the mines would be comfortable and know that they have a regular and reliable supply of power.
He said the move had put the government in an awkward position internationally.
“The first question they will ask is, what’s the plan? You are a Zambian, when you think about it, what’s the plan, what is the end game government looking for? Is the end game that we injure CEC and injure our energy sector? I can’t see anything good about destroying CEC. I can’t see it. So why can’t the government just sit down, negotiate and agree?” asked Simumba. “Because is this how they are going to negotiate with lenders? Because we are starting negotiations with lenders over the Eurobonds and other loans, is this how they are going to behave? Because already the lenders have put the gauntlet to the government to say we want to see the plan endorsed by the IMF that requires negotiation, that requires being transparent, being open. So the IMF will ask the question to say but you are complaining about the energy sector, you are complaining about mining but why have you done this to CEC? CEC has borrowed money, Zesco has borrowed money on the basis of revenue from CEC so what’s going to happen to all this?”