Energy Red Card

Zambia continues to struggle with a self made energy crisis as a result of poor planning and investment, exacerbated by the global economic recession and the rising cost of crude oil.

In addition, the rainy season is upon us and the demand for energy, both in the form of oil based fuels and electricity, will increase exponentially in both the productive sectors as well as the average domestic households.

Lusaka is characterised by long queues at petrol stations as the fuel shortage continues, and during the 24 hour day most households and major industry experiences power outages. This has now become normal to us, until we are reminded about the abnormality in a developing country by outside visitors, who question whether the situation is acceptable.

Indeni Oil Refinery is gasping to stay operational as the private investor pulls out and Government assumes 100 percent control of the plant. Problems of plant maintenance and the non availability of specific refining requisites have crept up and one only expects to hear more challenges emerging as the saga unravels. The basic situation is that there is no fuel coming out of Indeni and the country has to rely on imports of finished fuels from South Africa and other sources. The queues which we were told would be temporary are fast becoming a normal feature of the country’s status. There seems to be no solution in sight.

Electricity is an ongoing challenge as fire guts part of the Kariba North Bank power station which now requires at least 6 months to rehabilitate and upgrade. The Zambia Electricity Supply Corporation (ZESCO) is now faced with additional costs of repairs, and the replacement of transformers and sub stations where the supply units have been damaged due to overloading and other disasters that affect the electricity supply industry.

The energy crisis is not unique to Zambia. South Africa and Uganda are grappling with similar problems. In Uganda, the Government has stepped in to resolve problems with the Umeme private distribution project which included addressing the high tariff systems and issues with the billing system that have pointed towards fraud. The South African trade unions have risen up to challenge the Government for allowing the tariffs for electricity to be increased by 45 percent every year for the next three years. Industry and private sector experts have argued that a 45 percent tariff increase would cause price spirals upwards for almost all commodities and services. In addition, mining smelters would shut down, and inflation would be pushed up by 2 percent. Mining operations costs would go up by 15 percent of which electricity costs would account for 25 percent of total running costs. This could be the way Zambia will go too.

Electricity deficits result in selective supply strategies which naturally impacts greatest on the common man. Households suffer the most as high density residential areas are the worst hit while low density urban areas will usually enjoy relatively consistent supply of electricity.

Zambia’s energy crisis demands some new and innovative thinking in respect to current management of the resources, and committed investments in the short term and long term development of energy sources. This is not happening in any meaningful way. There are no partnerships between ZESCO and the local television and radio stations to manage electricity more prudently and to engage the consumer in the exercise. We have no concrete plans for developing new electricity generating resources but see value in supporting intermediary distributors that will only add to the cost of energy, and probably develop similar problems as those experienced in Uganda, at Umeme.

We may be better off taking a lesson from Angola, where foreign investors have been invited to exploit oil resources on condition that all the roads and railway systems be re-built as part of the deal. Rwanda is working on a similar program to engage investors in a more developmental partnership than to just focus on energy production taxes.

Now the World Bank and their bunch of experts have added to the energy debate by making recommendations that do not take into account the vision of the country, nor the requirements on the ground to facilitate economic activity that is the engine for private sector growth. The only useful comment coming from the World Bank is that infrastructure growth which includes the supply of electricity, will support an increase in Gross Domestic Product.

World Bank comparisons of Zambia’s electricity tariffs with those of Chad is ridiculous. Zambia has 40 percent of the region’s water while Chad has very little water resources. Water and electricity should be Zambia’s comparative advantage. We do not see Saudi Arabia comparing the price of diesel with Zambia. We do not see the port of Durban comparing sea shipping costs with Zambia’s airfreight costs.

It is nonsense for a World Bank expert to note that Zambians who have access to electricity do not have problems paying for the commodity, but at the same time the experts acknowledge that very few people in Zambia do have access to electricity. Does it not occur to our foreign experts that the benchmark cannot be the minority ‘well to do’s’, it must be the majority ‘have nots’.

Zambia should be striving to electrify almost all industries in the nation. Electricity is a commodity that Zambia produces and can produce more of. Electricity can run all our industries, households, mining activities, and even mass transport railway systems.

Electricity and oil based fuels are development inputs and this is acknowledged all over the world. The United Kingdom, the United States of America and all of Europe run the electricity sector through Government and quasi Government institutions. Some Pseudo private ownership is sometimes noted as private sector investments in the energy sector. Examples are, British Energy in which over 90 percent ownership is camouflaged in seemingly private ownership which cannot be traced. All USA nuclear power stations have Government oversight seemingly to cover public safety (radiation monitoring and waste disposal) but it is well known fact that the Government will finance any developmental costs in the public interest. Where does the World Bank and other misguided experts get the notion that electricity can be a privately run utility in a developing country where low cost energy is the pre-requisite for development?

It is time to pull out the Energy Red Card. Red card to the World Bank! Red card to the Minister of Energy and his team! Red card to the misguided perception that energy is just another business! Zambia is held to ransom when fuel and electricity are not available at a cost that will facilitate and support development.

Published 24 November 2009