MOPANI PUZZLE

Fri, 25 Aug 2017 09:50:52 +0000

Something is not adding up.

Why did the Copperbelt Energy Corporation (CEC) restrict power to the mines in abrogation of a Power Purchase Agreement that provides for arbitration in the event of a dispute?

As a nation and as a people every day we are losing $3m in lost production because CEC has abrogated the power purchase agreement.

That there is a dispute is not an issue.  What is bothering us is the very nature of the dispute which neither CEC nor Mopani have been candid enough to share with the rest of the country.

For us it is a question of principle and the law.  CEC has a legal duty to abide by the terms and conditions established in the PPA.  But more importantly it has a moral duty beyond the agreement to ensure that this country derives maximum benefit from its resources by maintaining full production of all mines at all times.

There is no doubt that whatever loss CEC or ZESCO may make in the interim will be recovered in full and perhaps with interest after arbitration as provided for in the agreement.

Sadly, lost production will not be recovered and indeed if the production flow is interrupted, reinstating the system to full capacity will take a long time against which no financial remedy will make up in compensation.

It is equally intriguing that a few days ago the two ministers of Finance and Mines brokered an agreement between FQM and ZESCO which suggested among other things that FQM had migrated to the new tariffs while according it the opportunity to import power.

It is, therefore, not clear what terms and conditions have been agreed upon between the various mining units and if indeed a flat rate applies to all regardless of their circumstances, technical ability and power usage capacities.

What we know for a fact is that Zambian mines bear different cost structures on the basis of the copper content with which they work

In the case of Mopani which has among the wettest mines in the world, the bulk of electricity inevitably is used on pumping out water.  Similarly, some other mines have the lowest copper content ores. Therefore, their production capacity and electricity usage centres on aggregation of the same to achieve sufficient volumes for processing.

This implies cost differentials across the industry which may compel a differentiation.  Therefore generalisation may not constitute the best approach in justifying the current crisis which in the first place has been created by an abrogation of a legally binding Power Purchase Agreement which is subsisting.

Our view has always been that the mines should be allowed to operate fully, to ensure full employment while differences are negotiated through the various mechanisms that are in-built in the agreement.  But we would even go further and agree with the Zambia Republican Party president, Wright Musoma, who has proposed a drastic solution of nationalising CEC to place it under mining companies as was the case before privatisation.

Mr Musoma asserted and we agree that the current impasse would not have arisen if the mines themselves were buying power from ZESC and distributing it among themselves on the basis of need.

The government has a duty and a responsibility to examine these options to ensure that the current mishaps do not visit the mining industry.