By FRED HANG’ANDU –
Introduction
As Zambia celebrates this year of the jubilee to mark the country’s fiftieth independence anniversary, it is important to look back at key developments in one of the key sectors of the national economy – energy.
In fact, it is quite clear that our socio-economic development in the last fifty years largely mirrors this very important sector often referred to, and rightly so, as the engine of the economy.
Therefore, in this week’s energy column, we look at some of the key interventions in the policy, institutional and legal framework that have shaped the direction of the energy sector, and to some extent, the national economy.
For purposes of this article, we shall mainly focus on what are largely considered to be the major two sub-sectors of the energy sector given the level of their development/growth when compared to others.
They are the petroleum and electricity sub-sectors. This is by no means to ignore the other forms of energy, which shall be discussed in other articles.
The Petroleum Sub-Sector
The petroleum sub-sector has seen major developments not only in terms of the number of players but also the level of investment owing to a number of factors.
At Zambia’s independence in 1964, multi-national Oil Marketing Companies (OMCs) such as Agip, Caltex, Mobil Oil, Shell-BP and Total used to import petroleum products into the country which tey supplied to the local market.
Finished petroleum products were imported mainly by rail using the southern corridor through Livingstone up until 1965 when Zambia’s southern border was closed.
The imposition of economic sanctions pursuant to Ian Smith’s Unilateral Declaration of Independence (UDI) of Rhodesia which led to closure of Zambia’s Southern border in 1965 severely disrupted the supply of petroleum products into the country.
Consequently, Zambia had to airlift or transport by road (through the infamous Hell Run) large quantities of fuel from East Africa and the Congo.
The security of supply challenges resulting from the UDI led the Government of the Republic of Zambia to construct the Tanzania Zambia Mafuta (TAZAMA) Pipelines, co-owned by Zambia (67 per cent) and Tanzania (33 per cent). The pipeline was commissioned in 1968.
The pipeline was initially used to transport finished petroleum products.
The finished products were pumped to a storage terminal in Ndola then operated by the Ndola Oil Storage Company (NOSCO), now known as the Ndola Fuel Terminal. NOSCO served as the terminal from which petroleum products were distributed to Oil Marketing Companies by ZIMOIL. Later,TAZAMA Pipeline was converted to transport/pump crude oil (commingled feedstock) in 1973 following the commissioning of the INDENI Petroleum Refinery.
At inception, INDENI Petroleum Refinery was jointly owned by the Republic of Zambia through INDECO Group of Companies (50 per cent) and Italy (50 per cent) through Agip Petroli Spa (a subsidiary of ENI, the Italian Government Energy parastatal).
INDENI is now wholly owned by the Zambian Government after dissolution of the last partnership with Total Outre Mere in 2009, when the French Oil giant sold its shareholding.
Following the formation of ZIMCO, all four parastatal companies (INDENI, NOSCO, ZIMOIL and TAZAMA) were transferred into the ZIMCO portfolio.
From then until 1999, ZIMOIL and its successor Zambia National Oil Company (ZNOC), were responsible for procurement of feedstock and the sale of refined petroleum products in Zambia.
It should be noted though that all policy decisions affecting the petroleum industry relating to pricing and investment were under the control of government throughout that period.
While the transportation of petroleum feedstock, refining and wholesale of finished petroleum products remains under government control, there has been increased private participation in distribution and retailing of finished products over the years.
The petroleum sub-sector now boasts about forty two Oil Marketing Companies (OMCs) and two hundred and forty one transporters licensees.
The licensees include multi-national companies such as Total and Puma and locally owned OMCs. It should be noted that private participation in the petroleum sub-sector was largely made possible by the liberalisation of the economy.
The electricity sub-sector
Much like the petroleum sub-sector, the electricity sub-sector has seen significant changes over the years.
In 1964, the mining companies, which to date remain the single largest consumer category, formed a power company called Rhodesia Congo Border Power Company for purposes of operating the interconnector transmission line from Katanga in the neighbouring Democratic Republic of Congo (then the Belgian Congo) to Kitwe on the Copperbelt, and also distributing power on the Copperbelt.
The company was later renamed the Copperbelt Power Company (CPC) in 1964.
In 1982, CPC became the Power Division of the newly formed Zambia Consolidated Copper Mines (ZCCM).
In 1997, ZCCM Power Division was privatised and the CEC which exists to date was born.
Between 1954 and 1959 the Government of the Federation of Rhodesia and Nyasaland constructed a dam on the Zambezi River at Kariba Gorge that would connect northern and southern Rhodesia, and create a reservoir from which to generate hydro-electricity for the mines on the Copperbelt.
The construction of the dam remains one of the landmark developments of the country and region’s power sector.
Construction of Kariba dam began in 1954, and in 1962, the 666 Mega Watts (MW) Kariba South Bank power station was commissioned. Kariba South Bank power station was owned and operated by the Central African Power Corporation (CAPCO), set-up by the governments of Northern Rhodesia and Southern Rhodesia in 1963.
CAPCO was established for bulk power generation and transmission.
It also owned the powerlines and high voltage substations running up to the Copperbelt.
In Zambia, CAPCO, which supplied almost all of the country’s power requirements, had two customers namely the Central Energy Corporation supplying Lusaka and surrounding areas and CPC supplying the Copperbelt.
In 1967,construction of the first indigenous large hydropower projectbegan. By 1972 the 600MW Kafue Gorge powerstationhad been built.
Furthermore, in 1973, work began on a dam 250km upstream of the Kafue River to increase capacity at Kafue Gorge by 300MW.
By 1977, generation capacity at Kafue Gorge had been increased to 900MW and Zambia was home to a new reservoir at Itezhi-Tezhi. Meanwhile, to meet increasing demand, the 60MW B Station and 40MW C Station plants at Victoria Falls were commissioned in 1969 and 1973, respectively.
Perhaps, the most remarkable turning point in the electricity sub sector was to come through the formation of the Zambia Electricity Supply Corporation (ZESCO) in 1970.
With ZESCO in place, Zambia’s electricity sub-sector was to be redefined for many years to come.
ZESCO was now responsible for generation, transmission, distribution and supplyof electricity throughout the country, with the exception of areas supplied by CAPCO.
The following year, the Zambia Electricity Supply Act of 1970 was effected.
Thus, by statutory order of the Minister responsible for electricity, the rights, obligations and assets of existing electricity utilitiesnow allvested in ZESCO.
This meant thatfrom July 1970, ZESCO acquired and took over the operations of the following companies: Central Energy Corporation; The Northern Electricity Supply Corporation (NESCO) companies.
NESCO also purchased electricity from Copperbelt Power Company (CPC) and retailed it to consumers in the Copperbelt distribution network; and Victoria Falls Electricity Board (VFEB), which owned the power stations at the falls.
Furthermore, in 1972, ZESCO also took over municipal operations in Livingstone and Ndola,which were previously handled by the VFEB and Ndola Council Electricity.
Later the same year, five other operations were taken over on the Copperbelt in similar fashion.By 1985, ZESCO was supplying the entire country with the exception of the Coppermines and the Lead and Zinc mines in Kabwe.
The last major electricity generating plant constructed in Zambia was the 600MW Kariba North Bank power station (KNB).
The Zambian government formed the Kariba North Bank Company (KNBC) to operate the power station. The Kariba North Bank power station was commissioned in 1977, the year that two additional generators at Kafue Gorge also came into operation.
Zambia’s total installed capacity reached1, 608MW, way above the maximum demand at the time. As at 1982, Zambia’s maximum demand was about 846MW.
CAPCO was dissolved in 1987 by the simultaneous enactment of the Zambezi River Authority Act in the parliaments of Zambia and Zimbabwe. In Zambia, the Act provided for CAPCO’s electricity generation and transmission activities to be taken over by ZESCO and KNBC.
However, with the liberalisation of the economy following a change of government in 1991, came the Electricity Act, Cap 433 of the Laws of Zambia which came into effect in 1995.
The new Actallowed for participation of private investors in the Electricity Supply Industry (ESI).
Following liberalisation of the economy, the major players in the ESI included ZESCO Limited, a vertically integrated company which generates, transmits, distributes and supplies electricity throughout Zambia;Copperbelt Energy Corporation (CEC), a net transmitter of electricity purchased from ZESCO at high voltage and distributed to the mining industry on the Copperbelt; and Lunsemfwa Hydro Power Company, an independent power producer generating 48 MW of power that it sells to ZESCO Limited under a Power Purchase Agreement.
It is also worth noting that there exists a government agency, Rural Electrification Authority (REA) which seeks to increase access to electricity, especially in the rural areas.
In addition, there have been a host of other players emerging such as North Western Energy Corporation (NWEC).
Other participants of note in the sectorare small-scale generators and solar based energy services companies supplying power to some rural areas off the national grid.
Conclusion
As can be seen from the foregoing, a number of events and factors led to changes and developments that have been instructive to the complexion of Zambia’s energy sector as we know it today.
Having looked at the historical perspective of the energy sector in brief, we shall in future endeavor to look at the impact of regulation in the development of the energy sector in a little more detail.
(The author is senior manager – Consumer Affairs at ERB. For comments, send emails to erb@erb.org.zm)