ZESCO Limited’s revenues are at serious risk of being endangered if there is no speedy resolution to the Bulk Supply Agreement (BSA) with the Copperbelt Energy Corporation (CEC) Plc, warns former Finance Minister Felix Mutati.
And Mutati has cautioned that the PF’s Task-force, which has been instituted to oversee negotiations into the BSA, will have no legal effect because the ruling party has no role and interest in what is purely a business transaction between Zesco and CEC.
Meanwhile, Mutati has congratulated Association of Certified Chartered Accountants (ACCA) Zambia affiliates, urging them to remain steadfast in their pursuit of the profession and maintain high ethical standards.
In an interview in Lusaka, Mutati warned that Zesco’s revenues were endangered amidst the ongoing stand-off between CEC on the BSA because 60 per cent of the power utility’s revenues, which derived from mining companies on the Copperbelt, could suddenly be cut out.
“We must avoid the dangers, particularly on the part of Zesco. If, for example, come 31st of March, we don’t have any arrangements that is going to protect their revenue, it is conceivable that, because they can’t stop supply (of power) to the mines for a number of reasons, how, then, are they going to invoice to collect the money? There’ll be no framework for Zesco to collect the money; and the mines pay almost 60 per cent of their total revenue. Will they be able to survive another day without that revenue? ” Mutati said.
“That’s why I am calling it ‘commercial decency’, that, there must be arrangements that protects the interests of Zesco in the absence of the Bulk Supply Agreement, which includes invoicing, receipt of revenue. Zesco has got loans from whoever, and they have said: ‘the revenue that I get from this mine is going to be used for servicing my debt.’ Those lenders also want to feel comforted that their obligations are not endangered.”
He stressed that in the absence of a valid BSA, there ought to be an invoicing framework to secure Zesco’s revenue inflows from the Copperbelt.
“It (Zesco’s revenues) is actually endangered because, how, then, is the invoicing done? The framework of invoicing must be protected until permanent arrangements are made. At the very minimum, there must be an invoicing framework that is there between the parties involved. If you don’t put in an invoicing framework, it is possible that CEC will be paid by mines, but they don’t pass on the revenue because there is no invoicing framework; they (CEC) will hold the money until all these negotiations are finished,” Mutati cautioned.
He, however, added that electricity supply to mining companies would still continue as normal, even upon expiry of the BSA.
“Even upon expiry of the BSA, power will continue to flow; there’s no way the mining sector is going to be switched off. So, despite the absence of a legal framework, power will continue to flow,” he said.
Asked how the absence of a much-needed invoicing framework would affect Zesco’s overall commercial viability, he said it would threaten the power utility’s viability.
“In the absence of the invoicing framework, it will threaten the viability of Zesco. So, the urgency to have this interim arrangement leans a lot more on Zesco because they are not the primary recipients of the money, they are the secondary recipients. So, in order to receive, there has to be a mechanism that must be used to receive. So, it is absolutely in their (Zesco’s) best interest to do that, more-so, because Zesco has got broader obligations to you and me, who are relying on them to supply (power),” he replied.
“So, we don’t want the quarrels that they’ve got with CEC to impact on us who are not involved, isn’t it? At the end of the day, it’s about the tariff arithmetic, it’s not an impossible task; it’s how much do we share of this cake? How much does Zesco get, and how much does CEC get? And these are business cases.”
And Mutati, who also served as Works and Supply Minister in President Edgar Lungu’s Cabinet, cautioned that the PF’s Task-force, which had been instituted to oversee negotiations into the BSA, would have no legal effect because the ruling party had no role and interest in what is purely a business transaction between Zesco and CEC.
Last Monday, PF secretary general Davies Mwila told journalists in Lusaka during a press briefing that the PF had constituted a Task-force, which is being headed by immediate past Finance Minister Margaret Mwanakatwe with other party members, being PF chairperson for elections Yamfwa Mukanga and Brian Mundubile, the chairperson for legal affairs.
“There’s no role for the Task-force because the current legal framework provides that the regulator (Energy Regulation Board) does that. The Task-force will not have a legal effect on the transaction; you are dealing with monies here. So, let’s not sideline institutions that were established to create sanity in the (energy) sector so that every other player that is in the sector knows that if there’s any challenge, there is a point of call, and that point of call is your regulator, who is supposed to declare a fair settlement,” he advised.
Meanwhile, Mutati congratulated ACCA Zambia affiliates, urging them to remain steadfast in their pursuit of the profession.
Speaking to journalists on the sidelines of the ACCA Annual Affiliates Celebratory Dinner at the Radisson Blu Hotel in Lusaka, Thursday evening, Mutati urged accountant affiliates to maintain high ethical standards.
“The biggest challenge for accountants going forward, particularly in an economy, such as ours, is that they should not cease the opportunity in a negative sense; they should be able to remain ethical in the way they carry out their performance, whether they are working in government or private sector. Fiscal prudence across the accounting body is extremely important. So, my encouragement to the affiliates that are going to be members is that, desist the compromise on ethical standards; desist to compromise the high brand of ACCA that we have got,” urged Mutati.
“…But also for ACCA to weed out these pretenders, who are saying they are ACCA when they are actually not, they are tarnishing our image!”
The ACCA Zambia event celebrated its students that had completed and passed all the required programmes and are beginning the 36-month journey of the ACCA Practical Experience Requirement (PER) towards becoming an ACCA member.
The Ministry of Energy and Zesco announced last year that the BSA, which expires in three weeks’ time on March 31, would not be renewed, raising speculation of what new working arrangement would be in place after the agreement lapses.
Currently, Zesco utilizes CEC power infrastructure on the Copperbelt Province to distribute and supply electricity to its customers, which include the country’s major mining companies, enabling it to earn revenues, via the BSA.