Introduction

Last week we examined why energy traders’ matter, not as abstract intermediaries, but as risk absorbers, liquidity providers and cross-border market stabilisers in increasingly interconnected power pools. This week we examine whether Zambia’s current framework fit for this purpose, and what reforms may be necessary to ensure the smooth and secure participation of energy traders in a modernised regional electricity market?

Zambia’s Legal Recognition

Zambia’s Electricity Act No. 11 of 2019 does recognise trading. Section 2 defines an “enterprise” to include a company that trades in electricity as an intermediary, and the same section defines a “spot market,” demonstrating awareness of both bilateral and short-term competitive transactions. Section 5 criminalises unauthorised trading, linking the activity firmly to the licensing regime under the Act and the Energy Regulation Act No. 12 of 2019.

Trading is further embedded through open access provisions. For instance, Section 14 defines open access as non-discriminatory access to spare transmission and distribution capacity. This is the legal gateway through which traders may move power. Section 19 permits enterprises to enter into Power Purchase Agreements subject to Energy Regulation Board approval, while Section 17 regulates cross-border trade, requiring ministerial approval except for competitive spot market transactions or emergencies. Sections 30 and 37 centralise tariff oversight, including authority to determine minimum bilateral tariffs. Therefore, on paper, Zambia has recognition, licensing, access rights and tariff control.

Open Access and Market Structure

The recently issued Statutory Instrument 40 of 2024 operationalising open access moves the concept from definition to procedure, beginning to address capacity allocation, third-party access processing and use-of-system arrangements. This is significant progress; however, the deeper test lies in implementation. This includes, among other issues, transparent publication of available capacity, predictable wheeling charges and credible dispute resolution mechanisms transparent. Without these, open access remains legally declared but commercially fragile and that directly undermines trader participation.

The institutional picture complicates matters further. ZESCO Limited remains vertically integrated across generation, transmission ownership and system operation. That model becomes problematic when the same entity owns infrastructure, dispatches power and participates commercially. Non-discrimination in such a structure depends heavily on regulatory strength and information transparency, neither of which can be assumed.

Zambia’s National Energy Compact acknowledges the need to rethink sector structure, including market design and financial sustainability. That recognition is important; it signals awareness that historical arrangements may not be sufficient for a competitive regional environment. The open question remains pace and depth. Structural reform is complex, politically sensitive and financially intertwined with legacy obligations. Recognising the problem is one step operational separation and market-based discipline are quite another.

The South African Comparison

South Africa illustrates a more explicit statutory approach. The Electricity Regulation Act 4 of 2006 defines “trading” as “the buying or selling of electricity as a commercial activity” and, crucially, the statutory definitions of “transmission” and “distribution” expressly exclude trading, separating infrastructure control from commercial exchange at the definitional level. Section 14(3)(c) requires the Regulator to issue separate licences for trading, meaning the activity is neither implied nor absorbed into other functions.

Section 15 further allows the regulator to define the operational perimeter of traders through licence conditions, including the classes of customers served, counterparties involved and the energy sources covered. Under Sections 16(2) and 22(2), tariffs remain subject to regulatory oversight and licensees may not discriminate between customers without objective justification. This level of specificity provides legitimacy, market segmentation and grid coordination, all of which reduce regulatory ambiguity and support the bankability of trading arrangements. Yet the same structure can limit the commercial flexibility that traders rely on to respond quickly to evolving market opportunities, and in some instances regulatory overreach becomes a real risk. The Electricity Regulation Amendment Act 38 of 2024 goes further still, clarifying and separating the functions of transmission, system operation and market operation, and requiring a market operator to provide a transparent and non-discriminatory trading platform.

For Zambia, the lesson is not to replicate South Africa’s entire framework but to strike a balance; sufficient legal clarity to build investor confidence, without regulatory rigidity that could constrain new trading models as the market matures.

In sum, Zambia has taken important steps by recognising trading in law and operationalising open access through subsidiary legislation. The next phase is more demanding: clear participation rules, transparent network information and strong regulatory oversight will determine whether traders can operate with confidence. This may also require closer coordination between sector regulators and competition oversight institutions to guard against anti-competitive behaviour in emerging electricity trading markets. As trading expands within the SAPP, Zambia’s institutional framework must grow with it, not catch up to it.

Author: Isaac Mwaipopo heads the Centre for Trade Policy and Development in Zambia, guiding trade policies, public finance, extractives, and legislative reviews. His extensive experience ensures the organization remains a key resource for developments in these areas