Govt is in a fix over electricity tariff agreement with mines – economist

Economist Kampamba Shula says certain Mining agreements in Zambia are not signed in a transparent way thereby causing a lot of tension between mine owners and the government.

Speaking when he featured on the ‘Let the People Talk’ programme on radio phoenix yesterday, Shula also said there was need to unbundle Zesco limited in order to make it run efficiently.

Shula also noted that government was forgetting that it had signed and locked in certain deals with Mines.

“During the years from 2003 -2005 those days when Mwanawasa was President, and our debt was canceled and there was a trade off. The trade off of the IMF and the World bank had some officials come, talk to the Minister of Finance and tell them ‘you guys this is what you have to do’ you have to sign some concessions, give away the mines at certain prices, and lock in certain deals. So certain deals which were signed and locked in for 20 years, there is a close in there which says! ‘you cant change electricity tariffs for 20 years. So that is the fix that the government is in, that is the fix that in a village setting, the chief is in,” Shula said.

“Higher electricity tariffs have effects on the Mines in the sense that the Mines do not usually accept new tariffs. In past years when the government has proposed new tariffs for electricity, the Mines have taken the government as far as to court. Now someone would ask the reason for this? Its because certain Mining agreements in Zambia are not signed in a transparent way. So a lot of deals especially with some Mining companies have been signed in a way that lacked a bit of transparency. So what would happen is that you would say no! We have come to increase the new tariff and then the mine would say ‘ah! But we signed a contract and you told me you wont change the tariff for 20 years’.”

Asked whether he was of the same view that political interference had taken a toll on the running of Zesco, Shula said there was need to unbundle the utility company in order to end monopoly.

“Zesco has certain issues relating to corporate governance even the way it has been managed over the years, some of the finances have been sort of interlinked with political situations happening in the country and over the years, I think its been an issue of corporate governance. There are monopolies that can run efficiently, though Zesco is one that unbundling would help,” he said.

“Zesco is that kind of an institution that has had corporate governance issues here and there because of political interference, maybe some certain positions were keyed for certain people and those people were not necessarily qualified for those positions but they happened to sit on those chairs.”

And giving his thought on the decision by Cabinet to establish a task force to look at the operations of Zesco, Shula said there was need for the task force to make recommendations on how corporate governance in Zesco could be changed to make it more transparent.

“So from this new task force that cabinet has set up, if recommendations can be made on how corporate governance structure in Zesco can be changed and made more transparent so that appointments are not made in secrecy, that could help in making Zesco efficient. With the operations of Zesco, I think there are certain economic dynamics that need to be explained,” said Shula.

         

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