Privatisation of ZESCO Limited : in search of an appropriate method

Abstract

Electricity is essential because nearly all sectors of an economy such as manufacturing, mining, construction and service provision use machinery and equipment powered by electricity. Insufficient electricity supply negatively affects countries striving to industrialise. Governments thus, endeavour to ensure that electricity utilities perform adequately. The current view is that electricity utilities perform well under private ownership and/or control. Nevertheless, there is lack of agreement on the best model for privatising electricity utilities. Therefore, the study‟s main objective was to develop the best model for privatising ZESCO Limited in order to improve its performance. The study relied on the Contingency Theory, which posits that the best model for privatising an enterprise is one, which takes into account a variety of internal and external environmental factors affecting its operations. The study was a descriptive mixed methods research combining both qualitative and quantitative designs. The study employed both case study and survey strategies. The study was conducted in Lusaka District. It employed a sample size of 816 respondents consisting 16 purposively selected informants comprised of officials from ZESCO, ERB and other relevant government institutions. Simple randomly sampled respondents comprised of 500 managers/owners of businesses and 300 managers/owners of organisations that represented domestic electricity consumers. Data was collected from published literature, interview guides and questionnaires. Quantitative and qualitative data were analysed using SPSS and thematic analysis, respectively. Findings revealed that ZESCO‟s performance was poor across all performance indicators. It was discovered that ZESCO‟s performance would improve if it were privatised. In addition, competitive concession is the best model for divesting ZESCO. ZESCO should be vertically and horizontally unbundled into separate generation, transmission and distribution units. Control of each unit should then be transferred to different firms on competitive basis. The model promoted competition while allowing the government to retake control in case of failed performance. The study recommends improving ZDA‟s autonomy to enable it undertake privatisation without political interference. The study also recommends improving ERB‟s independence by allowing it to regulate the energy industry without political pressure. Sources of electricity should be diversified, improve incentives for rural electrification and tariffs should be cost reflective.