Mutati warns of energy crisis

FELIX Mutati says Zambia has a chance to avoid an energy crisis by making power tariffs cost-reflective to attract private sector investments in the electricity sector.

And chairperson of the parliamentary committee on economic affairs, energy and labour, Kennedy Hamudulu, says Copperbelt Energy Corporation has taken a bold move to invest in an expensive power generation project on Kabompo River in Mwinilunga despite the current unfavourable power tariff regime.

Speaking in an interview after the committee toured the site, Mutati said the country will face an energy crisis if government bureaucracy continues to hamper efforts by potential investors to build more generation capacity.

He said bureaucracy would not help the country, which needs an additional 600 to 1,000 megawatts of power, requiring an investment of up to US $4 billion to support government’s move to diversify the economy to other sectors such as agriculture and manufacturing.

“We have a crisis of private sector investment in the power sector. This crisis has been driven by a number of factors. There is the issue of bureaucracy. The various permits, grants, agreements that are required to be used in order to anchor and support investment. Let us not preach that we want to attract investment in the power sector on one hand but on a practical side, we are not facilitating [investment] and using bureaucracy as a tool that slows down even the investment that we have got in our hands,” Mutati said.

He said because of bureaucracy, CEC had for three years failed to conclude negotiations with the government for an investment agreement, which was key for the firm to secure vital funds from financial markets as potential investors were reluctant to engage the power company on the project.

Mutati said CEC was not in a position to raise from its internal generation the required US $205 million for the project to take off.

He also said the reluctance by stakeholders to face the reality that the tariff regime in the country was not cost-reflective and could not attract potential investment to bridge the widening gap between demand and supply would create a crisis in the near future.

“We shall end up with a deficit of power such as the one that has confronted [South Africa’s power firm] Eskom. Eskom was dilly-dallying in terms of investment in the power sector, now they have reached a crisis point where they have run out of power. We are also unfortunately proceeding on a similar path where we have a bit of time to address this issue but we are not doing the correct things, particularly from a tariff perspective. There is need for aggression. Unless we address the tariff issue, there is absolutely no way we are going to attract private sector investment in the power sector,” Mutati said.

He noted that because of insufficient investment in the energy sector, other areas of diversification from a copper-driven economy such as agriculture and manufacturing would be stunted and ultimately lead to slow national economic growth, increased poverty and fewer jobs.

Mutati said because of the low tariffs, Zesco was spending huge sums subsidising the sector by selling power cheaply.

And Hamudulu said the current cost of energy at six cents per kilowatt was not reflective compared with the project, whose construction was based on 13 cents per kilowatt tariff.

Hamudulu, who was accompanied by Mutati, Margret Miti, Dr Situmbeko Musokotwane, Wylbur Simuusa and Villie Lombanya, also said the country was lagging behind in making electricity accessible to the majority of citizens.


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