Government’s approach to the differences between Zesco and the Copperbelt Energy Corporation, and the subsequent effects on Konkola Copper Mines, reminds us of that ill-conceived bitterness from a hateful parent to an ambitious step child. It seems to us that government is backing every reason that Zesco has for failing to provide energy to its customers, but they are not willing to listen and accept any challenges that CEC may have in continuing to provide power to Konkola Copper Mines specifically. When Zesco demands more money from electricity consumers, the parent acts swiftly to ensure that is done, but when CEC, the step child, claims its debt from one particular customer, the hateful parent prefers to protect the consumer. This approach can be a source of concern, not only for CEC, but for other investors as well.
Before we get any further into our argument, let’s establish a few facts. CEC trades as a private entity, listed on the Lusaka Securities Exchange and the majority of the shares are in private hands but it is owned nearly 25% by the Zambian Government through ZCCM-IH. In fact, from publicly available documents, one would argue that adding the number of public or government associated or owned organisations that have shares in CEC, the government has quite a substantial stake. The government also owns ZESCO and the majority of ZCCM-IH and 20% of KCM through the Industrial Development Corporation. Since May 2019, government has been fully in charge of KCM operations through the provisional liquidator, Mr Milingo Lungu.
Last week, CEC claimed that KCM has not been paying its electricity bill which has accumulated to about US$132 million. In pursuing this debt, CEC threatened to stop providing the full power requirement to the mining company until the bill is cleared. But KCM sought an order of interim relief from the Kitwe High Court to restrain CEC from effecting the power restriction. That is the summary of facts.
What we find interesting is that the consumer is not disputing that electricity worth US$132 million has been used at the mine, but government doesn’t seem to care about this debt or how the supplier has been surviving. Even when KCM has not been paying for all the good and bad reasons that the Provisional Liquidator may have, Zesco wants what CEC is owing for the power uptake to be paid, and government sees nothing awkward about that arrangement.
The mining company, though under liquidation, is in desperate need of money to keep its operations going, that’s understood. But isn’t CEC just as desperate to keep itself afloat financially through power consumption payments from its biggest client? Why is government not interested in the plight of CEC? To us, this looks like government doesn’t mind if CEC, the step child, collapses since that scenario would automatically benefit the biological child, Zesco.
KCM failing to pay for power and other services is not new. We recall that in 2014 when KCM was under the control of Vedanta Resources, CEC again restricted power supply to the mine over the same debt problem. At that time, government seemed to understand the logical claim from CEC, and yet the amount then was a fraction of the current debt. But now that they are in charge of the mine, they want KCM to use free electricity. This is not good for private investment.
We are not saying CEC is a blameless company; it definitely has its own challenges, and those with grievances against the power utility are free to seek legal redress. But what we are saying is that there is need to protect the private sector. Government must support efforts that private citizens are putting in place to run big corporations like CEC. This will, in turn, build investor confidence and in the long run, a strong private sector will immensely grow the economy.
CEC is a local company, so why doesn’t it receive the same support from our government which it claims to give to local businesses? We recall that at the beginning of March this year, PF Secretary General Davies Mwila announced that the ruling party had appointed a task-force to ensure that the negotiations for the Bulk Supply Agreement between Zesco and CEC are concluded before March 31 in order to protect the 400 jobs at CEC.
But what is happening is the opposite. The said negotiations, which we were told would have been led by madam Margaret Mwanakatwe, have yielded nothing. And now it appears the PF and its government are not really interested in protecting jobs at CEC. Rather, it seems they want to take it over, and if that fails, Zesco, which they can control, should take over all the business from CEC. That’s what we see happening here.