NESAWU report on Attempts to Privatise ZESCO

KC JOURNAL NO 4 June 2003

Y Mtayachalo* reports that arguments advanced by the IMF for the privatisation of ZESCO are not valid, and that commercialisation is a better option

Zambia is a developing nation that has depended on financial support from donor agencies. Due to the reason above, the World Bank/IMF came up with a policy of qualification in funding for third world countries called HIPC. The HIPC funding had conditions to which the poor countries reacted to in many different ways in order to qualify. Zambia, being poor, and for some reason in trying to meet the conditionalities, pledged to carry out many programmes, among which was the privatisation of parastatal companies. The Zambia Electricity Supply Commission (ZESCO) is one of these companies.

The electricity market in Zambia is made up of very few players. These are : ZESCO, with an installed capacity of 1040 MW hydro generation; Kariba North Bank, with installed capacity of 600 MW hydro generation; Copper-belt Energy Corporation, with installed capacity of 80 MW thermal power and Lunsemfya Hydropower with installed capacity of 40 MW. The bulk of transmission is owned by ZESCO and over 90% of distribution is owned by ZESCO. The total demand for Zambia is currently at 1100 MW, which is met by domestic hydrogenation. Zambia exports surplus energy to neighbouring countries.

The reasons advanced for privatisation are that the utility could improve its financial performance, attract new investment, improve the quality of service, introduce new technology and increase access to the service (rural electrification). The National Energy Sector and Allied Workers Union (NESAWU) and many stakeholders do appreciate the concerns raised as to why ZESCO should be privatised, but argue that the concerns can be addressed without ZESCO being privatised. ZESCO as an electricity provider plays an important role in the development of the country. Already the arguments by the World Bank/IMF that the tariff is not economical have been practically refuted by the actual facts in the country. Most water utilities are failing to pay ZESCO bills. The farmers have a reduced tariff rate and this helped in the good harvest in the last farming season. Many households have been cut off the service because they cannot afford. We would rather the energy sector remains public. Actually, even water utilities should return to public control, as their privatisation could be the reason why the owners are failing to pay their electricity bills. This might be because they want huge profits as private firms, at the expense of meeting their debts.

NESAWU realised the need for the workers to be highly productive and dedicated to service, not only for personal income, but more still for patriotic reasons, because energy is the engine of growth, development and poverty reduction. This is why we always negotiate for reasonable but competitive pay so that the workers remain motivated and in turn provide a good service.

Due to NESAWU’s support to management, the performance of ZESCO has drastically improved. We could also note and appreciate that the new deal introduced by government has also helped. Government has cut interference, though we still await total independence from the government. We think the government should stop appointing the board of directors and the chief executive. If this is achieved, the company will once more be running at huge profits. However, it is important to underline the fact that over the last one-year period, the performance of ZESCO has improved. It is managed as a commercial enterprise and has made a profit of K37.0 billion, and will be declaring dividends to its shareholders. The vision for the New Year is to hit a profit after tax of at least K70 billion – something that will attract confidence in the company from financial institutions.

In line with the improvements in the performance of ZESCO, NESAWU supports that ZESCO be commercialised as opposed to privatisation/concession. It is for this reason that NESAWU is a member of ZESCO Commercialisation Assessment Team (ZECAT). We want the utility to remain in public hands so that the returns could be used for public development and poverty reduction. If it went to private hands most profits would go out of the country and leave the Zambians poorer. It is mostly the locals who could improve their nation for they know it best.

The union remains committed and will campaign against all forms of privatisation and government interference.

 

* Y Mtayachalo is the General Secretary of NESAWU, an affiliate of the PSI in Zambia.

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