Should we sell ZESCO? An (archived) online conversation

zesco
Photo credit: Dan Hartwright Photography

Here’s a conversation from the Zambian Economist’s Facebook page that I took part in last year.

The Zambian Economist:

A reader has asked an important question :

‘Why cant we just sell ZESCO? It’s clear that we have failed to run this company as Zambians. If we sell 49 percent we can retain 51 percent. Look at ZANACO. It has greatly improved.’

(Source : Armstrong Lubaba)

What are your views?

My response: 

Selling 49% of ZESCO to private investors is a plausible option, something I would support if priority was given to Zambian registered electrical engineering and commercial entities for the primary purpose of taxation and reinvestment (direct and indirect) into the local economy.

We all know that ZESCO has not been performing well for a while now. The task we expect it to perform is huge. According to its January-April 2013 newsletter, 75% of Zambians are without access to electricity (97% in rural areas!!). In addition, supply is currently lagging behind demand. The national demand for power is 1780 MW against a supply of only 1700 MW according to the same newsletter. With households and growing number of businesses requiring more and more power, it’s no wonder that loadshedding has become regular and necessary. To improve this, I think three options exist for ZESCO:

a) It could be internally restructured, still retaining its 100% parastatal status while significantly reducing overhead costs and making it more agile and responsive to customer needs
b) It could be broken up completely and sold to create smaller (perhaps regional?) electricity supply companies. We’ll however need to learn lessons from the mess and corruption of the ZCCM privatisation process. Or
c) It could be partially sold (the 49% suggestion). This would provide the company with access to finance and technical expertise without significantly increasing the country’s national budget deficit through Eurobonds, for example.

That said, there are reasons why I think there may be some reluctance to sell even a small part of the company:

a) In the eyes of the powers that be, ZESCO’s performance is actually okay given the situation in the Southern African region and beyond. Some policymakers and ZESCO representatives would probably argue that because demand for electricity has outstripped supply across the region, loadshedding has become necessary – even the South Africans experience it!! And they would point to the various projects that are in the pipeline and say “Look! We are working on increasing supply. Be patient with us!” It has to be said however, that successive governments have not adequately planned for the surge in economic activity.

b) The electricity supply sector is seen to be politically-sensitive. Even a small increase in prices, for example, is likely to make any government unpopular. It’s bad enough trying to convince people that loadshedding is necessary; what more having to justify price increases that you haven’t set but that affect your voters?! A population that begins to see that not everything is PRIMARILY the responsibility of the government will understand this. I don’t think we’re at that stage yet.

c) National pride. We keep believing we can sort this one out. It’s been years! The ‘national pride’ mantra needs to be kept in check because it seems to be causing us to throw money at projects that create more waste than value. For me the national airline idea is a case in point.

d) It acts as a cash cow/donor for whichever party is in government. This is a cynical point but one that may be possible.

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