Zesa’s lilliputian ambitions

ZESA is not a big utility company. By international standards, it is in the small to medium sized enterprise grouping.

Painoina with Tapiwa Nyandoro

For all intent and purpose, it has the capacity of one modern power station be it hydro or thermal.

It has an installed generation capacity of a mere 2 200 megawatts, around half of which is not accessible due to inadequate funds for planned maintenance and repairs and renewals.

Then of course there is the shareholder’s now well-known lack of resourcefulness as regards decision making on funding options and the way forward.

Telkom, the South African utility company, by comparison, has an installed capacity of 40 000 megawatts. It is in good financial health and alongside the transport and logistics company, Transnet, is spearheading the South African National Growth Plan-NDP.

Despite its lilliputian size by electricity utility enterprise standards, Zesa is headed for restructuring to even smaller units. Already it is not able to build its own thermal or hydro-power stations.

It has to suffer the disgrace of advertising tenders for outside engineering companies to provide the capability. One expects Zesa’s engineering division, the Army’s Corp of Engineers besides the school of engineering at the University of Zimbabwe, to have this basic engineering competency.

The situation might get worse when Zesa is dismembered. But that is the course Cabinet, in its desperation, has decided to go. Is it ambitious or retrogressive? Will it begat an Energy Transnational Company from Zimbabwe, as should be our aim? Is it long term focused as it should be?

Will it generate electricity at a cost competitive and sustainable rate? Is it compliant with the nation’s energy strategy, if any?
And what was wrong with the former structure that we inherited at independence? It worked well. It was good for increasing urbanisation, a goal that should have been our strategy?

Instead we went in the wrong direction in pursuit of the so called growth points, and overall decreasing the country’s comparative advantage as regards the cost of energy and its reliability and availability. The Rural Electrification Programme could more cost effectively been driven by solar energy.

But there was never time for thinking. Zesa had to be dragged into it. Elections had to be won. Locally we have seen the same in public transport. We inherited at independence a good system of public transport. We messed it up within two decades cheered on by a plethora of intrusive “international” advisers, not least the so called Washington consensus.

Are we embarking on the same course with Zesa for the third time in three decades? The British too, who took this road as regards rail transport and power generation and distribution, have not exactly, in hindsight, been full of praise of their Thatcherism initiatives which called for privatisation as the solution to the provision of public goods and services.

Zesa’s chairperson is a formidable engineering intellect. Once, he was the utility’s most competent general manager. When he takes a position, as he seemingly has done on the Zesa restructuring, according to recent NewsDay, one must sit up and take notice.

More so as it seems he is supported by that most able chartered accountant, the Energy minister, Elton Mangoma. The two want to break Zesa into a generation company, a transmission company and a distribution company. This they say will improve operational efficiencies. I beg to differ unless shown the evidence.

They also claim it will increase investment into the sector; really? Besides, they further claim, the unbundling reduces political interference.

On this they may be wrong. It is the value system that determines political interference. You can ask the banks, the mines such as Zimplats or Unki or for that matter the Commercial Farmers’ Union. I do not also see the logic of complexity in improving efficiency.
Simplest is a best engineering dictum.

Is it not? Then of course there is that fad about sticking to “core” business. But this is now outdated. Conglomerates like South Korea’s Samsung, America’s GEC and India’s Tata have proved the fad wrong. Have they not?

On all these fronts where it is claimed there is potential to unlock value, it would have been better, cheaper and easier to merge with Eskom.

Why was this simplest of solutions not pursued? Do we just pay lip service to regional economic integration? In exchange for the merger, we could have asked the new entity to progressively list on the Johanesburg Stock Exchange and the Zimbabwe Stock Exchange (ZSE).
The advantages of merging with Eskom are obvious.

Long term money can be sourced cheaply due to Eskom’s high credit rating. Eskom has the technical skills to bring generation locally to installed capacity expeditiously, besides increasing it. The merger increases efficiencies through greater economies of scale.

If a wholesale merger is too much for our timid government then a 49% stake could be sold to Eskom in exchange for cash, a management contract and technical expertise.

The joint venture could also be listed on the ZSE after a while with the government releasing part of its shareholding, or the joint venture raising more cash.

When faced with the collapse of the American automobile industry some two or so years ago, President Barack Obama applied this same principle to some degree with regards to Chrysler.

A portion of America’s third biggest automobile manufacturing company was sold off to its Italian rival Fiat. It has worked well.
And,yes it can, for Zesa as well.

Send your feedback to nyandoro.osbert1@gmail.com or feedback@newsday.co.zw

2 Comments

  1. Did you really mean Telkom dude? Telkom a power utility? Help someone?

  2. Mageja Siziba

    Mr. Nyandoro, you are obviously referring to ESKOM & not TELKOM in this article. All the same, I like your analysis which is similar to the comments I made regarding the proposed restructuring of ZESA in a recent edition of NewsDay. Both the Minister of Energy & Chairman of ZESA are going about the restructuring of the power utility wrongly. The whole thing will not wash given the impending harmonized elections which are around the corner.

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