THE impasse between the Copperbelt Energy Corporation (CEC) and Zesco Limited has reduced investor confidence and will negatively impact much-needed Foreign Direct Investment (FDI) inflows into Zambia’s energy sector, says Public Financial Management Consult senior economist Bright Chizonde.
And Chizonde says that the Ministry of Energy has failed to provide clear policy guidance to provide leadership in resolving the dispute between the power utilities as evidenced by its misplaced role in the whole process.
Responding to a press query, Chizonde lamented that the CEC-Zesco dispute had reduced investor confidence, which would negatively impact the much-needed FDI inflow into the energy sector.
“The standoff has reduced investor confidence and will, therefore, negatively impact the much-needed FDI inflow into the energy sector. This impact will be both in the short-term and long-term but will certainly be more pronounced in the long-term. At a time when the country is grappling with an energy crisis, we needed to attract investment into the sector through protecting property rights and creating an enabling environment for increased investment,” Chizonde stated.
He stated that the dramatic fall of CEC’s share price on the Lusaka Securities Exchange (LuSE) was down to Zesco’s failure to renew the lapsed Bulk Supply Agreement (BSA).
CEC’s share price on the LuSE dropped to K0.76 per share by Friday from K1.21 by the end of trading on June 12 in the aftermath of the utility’s BSA, which lapsed on March 31, 2020.
“It is no doubt that CEC’s historic performance on the LuSE is directly linked to the gains from the BSA. The fall in CEC’s share price can, therefore, be linked to negative investment sentiments and outlook created by the standoff. Any equity investor will be cautious about investing in CEC’s stock because the gains will not be as much as when this agreement was in place,” he observed.
And Chizonde, a former Centre for Trade Policy and Development (CTPD) researcher, stated that the Ministry of Energy had failed to provide clear policy guidance to provide leadership to resolve the dispute between both power utilities.
“The Ministry seems to have misplaced its role in this process. Government is expected to deal with market failure in order to restore efficiency. The Ministry should have quickly facilitated for a new agreement in order to safeguard the interests of investors in both the capital markets and the general mining sector, as well as secure the employment generated by these entities. Therefore, in playing such a neutral role, government should have not used its policy monopoly to take over the private assets of CEC. It makes more sense to make the distribution lines and infrastructure of Zesco a common carrier in order to attract private investment through reducing set-up costs,” stated Chizonde.
Last month, Energy Permanent Secretary Trevor Kaunda said that the Ministry of Energy was in the process of reviewing the controversial Statutory Instrument Number 57 of 2020, which had declared CEC’s infrastructure as common carrier, to enable other power utilities have access to Zesco’s infrastructure in the same way Zesco has access to CEC’s transmission and distribution lines on the Copperbelt.
Following that declaration, the national power utility went on to sign a Power Supply Agreement with Konkola Copper Mines, CEC’s hitherto biggest customer, despite the mining company still owing in excess of US $144 million to the Kitwe-based utility in unpaid electricity bills.