Investment in infrastructure key to growing Zambia’s energy sector

FOLLOWING the huge investor appetite in various sectors of the economy, including energy, Government has made it clear that it aims to enable and encourage private sector participation to improve infrastructure growth in the energy segment.

Efforts to invest in energy infrastructure have over the years been made by both Government and the private sector. On the petroleum and gas front, for example, the country’s growing competition in the petroleum sub-sector is expected to ensure the delivery of quality petroleum products.

The nation imports all its petroleum requirements, which contribute approximately nine percent of the national energy demand.

This sub-sector has received overwhelming interest from investors as can be seen by the new multi-purpose fuel pipeline between Tanzania and Zambia.

Zambia has reached an agreement with Tanzania to build a new self-financing multi-purpose fuel pipeline. Once completed, this will lead to increased fuel security and lower fuel pump prices because transportation of fuel by pipeline is cheaper than by road.

This project could be actualised in two years. It will be quicker to complete this project and cheaper because it has the advantage of being constructed on the same servitude with the current pipeline.

In addition, there is proven experience of operating long distance pipeline transportation business on the part of Tazama Pipeline Limited.

As alluded to by President Hakainde Hichilema when opening parliament last week, fuel transportation will be by pipeline going forward starting with converting the old pipeline from transporting crude oil to refined fuel.

Other developments in the sector include the agreement signed between Angola and Zambia for the development of a gas pipeline in the country. The two countries have stressed the urgency of the Angola-Zambia Oil Pipeline (AZOP) project which will support the Lobito Refinery in Lusaka.

The proposed development of a new pipeline, in addition to facilitating the supply of petroleum products from the Lobito Refinery, will also strengthen partnership between Angola and Zambia, and pave the way for greater economic integration of the countries of the Southern African Development Community region.

Firms such as the Harvest Group of Companies Limited, an oil and gas company, have also announced its investment in Zambia in this sub sector, with the recent financing deal signed with African Export-Import Bank (Afrexim Bank), worth US$310 million to build Zambia’s fuel strategic reserves in Solwezi, Choma and Kabwe reserves are key in reducing the cost of fuel in Zambia as well as creating product security once three strategic reserves are completed.

Harvest Group has gained a substantial share of the business of supply and transportation of petroleum products to various entities across Zambia and the Southern African region.

It has access to utilise its partner’s storage terminals, with a combined capacity in excess of 300 million litres for a range of refined petroleum products, such as petrol, diesel, kerosene and lubricants.

Former Energy Minister David Mabumba was recently quoted in the media saying that it is encouraging to see a number of fuel stations being established in the country.

“The sector is attractive because if the sector was not attractive you would not be able to see many people opening petrol stations across. What is important for me is that we are moving away from the big oil marketing companies.

If you have looked at the investment, you are seeing smaller, different names who are coming into the petroleum subsector. So to me, it does show that the environment is good for investment in the petroleum sub-sector because if the environment wasn’t too good, I am sure people will be very reluctant to come and invest,” Mr Mabumba said.

Zambia has an estimated large-hydro power potential of 6, 000 Megawatts (MW) of which less than 2, 000MW has been harnessed due to infrastructure that has not fully been developed.

Through various models such as the Public Private Partnerships (PPPs), various players have invested in Zambia’s energy sector, both for hydro and renewable energy as well as setting up of a number of fuel stations across the country which has seen infrastructure being put in place.

Zambia has continued to position itself to become a net exporter of power in the region as it embraces different pathways to a clean, affordable, and sustainable energy for all by 2030 as embedded in the United Nations Sustainable Development Goal Number (UNSDG) 7.

According to the Zambia Development Agency (ZDA), the demand for electricity has been growing at an average of about three percent, or between 150 and 200 MW, each year.

Zesco, the country’s largest electricity utility company has also upped its game by diversifying its energy mix from the current 99.9 percent dependent on hydro.

In October last year, the power utility company announced its intention to create 600 megawatts solar plants in Chibombo, Chirundu and Siavonga in a bid to ensure that the country becomes an electricity hub in the region.

                                                                                                                          Zesco has already created the 54 Megawatt Ngonye and Bangweulu Solar power plants which had been connected to the grid. The company’s customer base has increased from 660, 000 in 2014 to 1, 100, 000 customers in 2021.

Due to this increased demand, Zambia has over the years witnessed major project announcements to support the energy sector.

InfraCo Africa, part of the Private Infrastructure Development Group, the Danish Investment Fund for Developing Countries (IFU) and the EU-funded Electrification Financing Initiative (EDFI ElectriFi) this year committed US$15.5 million  to enable Africa GreenCo (GreenCo) to scale its innovative offering as Zambia’s first renewable energy buyer and services provider.

This investment will support the country’s ’s development of a greener and diversified energy mix: one that creates jobs and new business opportunities, whilst at the same time positioning Zambia as the region’s power trading hub.

Other players such as the Solar Alliance is scheduled to undertake feasibility studies in Zambia for the possibility of setting up a 400 megawatts of Solar PV projects in selected sites across the country.

“Zambia is an attractive investment destination because of its unbroken record of peace, security, and conducive investment environment.

“In addition to the energy sector, DIMITRI Energy and Investments is interested in buying Nickel minerals from existing mines in large quantities,” DIMITRI Energy and Investments chief executive officer Senait Dimitri stated.

With such investment, government has indicated that its focus in the energy sector is changing towards the promotion of increased investment in renewable energy.

Ministry of Energy Permanent Secretary Francesca Zyambo indicated at a meeting organised by the International Solar Alliance for the African Region, in Addis Ababa, Ethiopia that this is to diversify the energy mix as the country has positioned itself to be a net exporter of power in the region.

Just like the other key economic sectors of the economy, the energy industry has created a number of employment opportunities in Zambia.

Johnstone Chikwanda, an energy expert who also acknowledged that this industry creates massive employment levels thinks it is appropriate for Zambia to rethink the Petroleum Management Bill of 2019.

Reforms in the sector will be incomplete without significant amendments to the Petroleum Act of 1995.

Mr Chikwanda appealed for the implementation of enhanced fuel quality management protocols which verify a broader range of key parameters coupled with continued fuel marking to continuously improve the integrity of the fuel supply chain.

The challenge in most African countries including Zambia is that monitoring for fuel quality is limited to very few parameters such as density and presence of water. Yet the range of fuel parameters is many.

“This problem is compounded by the absence of quality monitoring equipment which covers a broader range of parameters in real time. This means that adulterants can potentially be added at source before arriving in the country and remain undetected due to a narrow test range being conducted in real time.

“To enhance the integrity of the fuel supply chain, leading countries have coupled fuel marking programmes with enhanced quality management programmes in real time. There is need to move away from monitoring two to three test parameters in real time,” Dr Chikwanda said.

With the coming on board of a number of investors in the energy sector, it is envisaged that more jobs will be created for local people and this will assist in alleviating poverty in Zambia.

From this analysis, it is envisaged that expanded investments in energy infrastructure to support the commercial use various type of energy could serve as a critical pull factor to improving the investment climate through higher energy-efficient economy, competitive energy prices and low overall cost of doing business.

The African Development Bank (AfDB) has mobilised and allocated resources for investment in the energy sector in many countries on the African continent including Zambia.

With an active portfolio of energy projects totalling over US$12 billion, AfDB is a key stakeholder and influencer in supporting access to clean and affordable energy across the Africa.

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