The government is conscious of the gravity of the current shortage of electric power and the risk it poses to sustained growth. Development of the electricity sector is vital to achieving sustained high growth and reducing poverty. In particular, greater electricity generation will be needed to support the envisaged expansion of mining, private sector growth, and the planned rural electrification program. There is a need to strengthen policies to ensure that sufficient electricity generation capacity is installed as quickly as possible to meet a rapidly growing demand. To this end, the government will develop policies with specific strategies to (i) gradually adjust electricity tariffs to reflect the cost of service; (ii) attract private investments and competition in the sector; (iii) increase the operational efficiency of ZESCO and strengthen its governance; and (iv) ensure that ZESCO has sufficient resources to implement the planned rehabilitation and new generation projects.
Given the urgency, the government intends to complete this action plan no later than June 2008 (structural performance criterion). Further, as a first step to improve the financial footing of ZESCO, the government will ensure that all arrears to ZESCO from ministries, provinces, and spending agencies (MPSAs) are paid by end-December 2008. Moreover, the MoFNP will issue a circular instructing all ministries, provinces, and spending agencies (MPSAs) that (i) all utility bills for each quarter are to be paid from the quarterly budget funding and (ii) all funds released for payment of utility bills should not be reallocated by MPSAs.
As I have said in previous blogs, many of these companies really only underperform due to the large debts owed to them. Its good that common sense is largely prevailing. But a note of caution – these temporary moves suffer from serious commitment issues. Even if the current government pays off these debts, whats to stop the next government accumulating similar debts? We need to take away the reason for accumulating these debts and that calls for elimination of the government “capture” of ZESCO. The same applies to ZAMTEL and parastatals suffering from this problem.