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Indeni isn’t refinery but a separator – Kalala

JACK Kalala has called for a critical evaluation of government’s intention to close Indeni Oil Refinery in Ndola.

There is a raging debate surrounding the future of Indeni going on in the country.

The debate has been triggered by the UPND government’s view that the refinery is consuming a lot of money in subsidies, with finance minister Situmbeko Musokotwane saying US $21 million is spent monthly.

Other stakeholders have opposed the idea, with Democratic Party leader Harry Kalaba advising the government to instead borrow money and refurbish the refinery.

Adding his voice to the debate, Kalala – a former special assistant to the president for policy and project implementation and monitoring – however said the government’s concern is genuine.

“Given the colossal amounts of money being wasted on fuel subsidies, the new dawn government leadership’s concern about Indeni is indeed genuine and valid. It needs urgent serious attention. The matter needs to be critically, objectively and pragmatically evaluated without emotions to establish the pros and cons that would [lead] to finding a lasting, favourable, and feasible solution to the current fuel supply and subsidy predicament,” he said in a statement. “The problem of the costly fuel and subsidies has always existed. Past governments had grappled with the issue of finding a cheaper source of feedstock. Many options were considered but to no avail due to the configuration of our refinery.”

Kalala explained the technicalities around Indeni, saying it is not in fact a refinery.

“In real sense the Indeni plant is not a refinery. It is a separator. It does not refine but separates the mixed finished products to restore them to their original form,” he explained. “What Zambia buys for Indeni to process is not crude oil but already refined products that are blended at source in a tanker and shipped to Dar-Es-Salaam and eventually transported to Ndola through TAZAMA Pipeline – which is the perfect way to transport crude oil and other petroleum products.”

He cited other countries with a similar arrangement which have seen it as a cheaper way.

Kalala argued that fuel importation should in fact be left to the private sector.

“It should be noted that Zambia was not the only country where this type of refinery had been built using the World Bank facility. Tanzania, DRC, Libya and Kenya were among other beneficiaries. Most of these countries, if not all, have since shut theirs. They have opted to importing finished products as it has proved to be economical and a better option for them,” Kalala said. “In most of these countries, the importation of fuel has been left to the private sector except, in some cases, for strategic reserves. In Kenya the business is completely in the hands of its nationals. It has been turned into a source of revenue – in form of taxes – for the Kenyan government.”

Kalala however, blamed citizens for always looking up to the government for solutions.

“The problem in Zambia is that citizens want everything to be done by their government. We have been accustomed to expect government to do everything for us, an unhealthy culture that was developed by the UNIP government after independence,” he said. “This culture of dependence on government did not make it possible for Zambians to develop the spirit of initiative and entrepreneurship. Instead, people were encouraged to look to government for most of their needs and solutions.”

He encouraged Zambian to own companies that can help grow the economy.

Kalala wondered why no Zambian owns a copper mine or cable processing plant.

“In Zambia it is beyond imagination for a citizen to own and run a large manufacturing facility like the cement making plant [Nigerian tycoon Aliko] Dangote has put up in Ndola. Dangote has built in Nigeria the largest petrol chemical industrial complex on the continent with a refinery which has a capacity of 650,000 barrels per day,” he explained. “Nigeria is an oil producing country, as Zambia is a copper producing country, yet no Zambian owns a copper cable manufacturing company, let alone a copper mine.”

Kalala said people advocating Indeni to be maintained in its current form were not being sincere.

“The people who are advocating for the continuation of the status quo at Indeni are simply not being sincere. They are just being sentimental and malicious. Would it not make sense and more beneficial to bring in white products at lower cost? Why continue with a costly process when there exists a better and more cost effective alternative?” Kalala wondered. “The suggestion that Zambia should acquire a $500 million hydrocarbon cracker to allow for the processing of the real crude oil is not ideal either as it would still not provide the necessary economies of scale to be cost effective and justifiable. A small refinery like Indeni is not cost effective and beneficial for the government to run. To achieve the necessary ideal results, it would require setting up a larger refinery to handle high quantities of crude oil and this would require investment of huge sums of funds in the project. Since Zambia is not an oil producing country, this investment is obviously not the best option.”

Kalala called on Zambians to instead develop cost effective economic activities.

He said being a copper producing country, Zambia should seriously consider value addition to copper and other natural resources found in the country.

“Factories should be built to produce finished products for local consumption and indeed for export to the outside world as opposed to exporting unprocessed raw materials. In this way more permanent high quality jobs would be created for the people and more economic benefits would be gained from the resources,” said Kalala. “To avoid unproductive debates, government should consider undertaking a pros and cons analysis of the available options, namely importation of finished products or continuation of the use of the Indeni refinery, in order to establish the most viable option to be retained. In addition, government should also seriously consider encouraging investment in the production of bio-fuel to reduce the bill on imported fuel. This is an opportunity that Zambians should take up. The government should consider establishing an investment fund – in collaboration with commercial banks – to help nationals to venture into business.”

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