Clarence Chongo, Lusaka, Thursday, 5 Spetember 2024 — At the time of writing, it has been almost half a year into Zambia’s seemingly unending energy crisis – a crisis that has left no corner of the country unscathed, plunging millions into darkness for hours on end. The energy woes that this nation is confronted by demand innovative solutions that transcend traditional approaches. As the rolling blackouts persist, crippling businesses and upending all our lives, the need for urgent action is increasingly apparent. Government, the private sector and the investor community must work hand in glove to confront this malaise with the unrelenting vigour that it requires and generate progressive ideas and solutions that will alleviate the situation sustainably.
One approach that is gaining increasing traction in the emerging discourse is the weaponisation of Public-Private Partnerships (PPPs).
But… What are Public-Private Partnerships?
PPPs are collaborative arrangements between government entities and private companies designed to finance, build, and operate projects serving the public interest. In these partnerships, the private sector contributes expertise, efficiency, and capital, while the government provides regulatory oversight and ensures the protection of public interests.
The concept of PPPs isn’t new to Zambia. We have witnessed successful implementations in various sectors, such as the Lusaka South Multi-Facility Economic Zone and the Kasumbalesa One-Stop Border Post. These examples demonstrate the potential for PPPs to drive economic growth and enhance public services. However, the energy sector presents unique challenges and opportunities that require reimagining PPPs into a more comprehensive and innovative fashion.
The Power of Collaboration in Energy
Zambia’s energy sector has already seen promising PPP initiatives. The Itezhi-Tezhi Hydroelectric Power Station, a 120MW joint venture between ZESCO and Tata Power of India, exemplifies how international partnerships can bolster Zambia’s power generation capacity. More recently, the Bangweulu and Ngonye Solar Power Plants, backed by the World Bank and involving the Industrial Development Corporation (IDC) and private operators, showcase the potential of PPPs in renewable energy.
These projects, while significant, are just the beginning. To deliver lasting transformation to the country’s energy ecosystem, we must look beyond individual projects and consider how PPPs can reshape the entire sector. This involves not only increasing power generation but also modernising grid infrastructure, exploring diverse renewable energy sources, and improving energy distribution and access across the country.
Learning from Regional Success Stories
Across Sub-Saharan Africa, countries are leveraging PPPs to address energy challenges. Kenya’s Lake Turkana Wind Power project, Africa’s largest wind farm, provides clean energy to millions and serves as a model for large-scale renewable energy PPPs. In Ghana, the Cenpower Kpone Independent Power Plant, a 350MW combined cycle gas turbine plant, demonstrates how PPPs can enhance thermal power generation and improve energy security.
Closer to home, South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) has attracted significant private investment in solar and wind energy projects. This program not only bolsters the country’s power supply but also creates jobs and stimulates local economic development – outcomes that Zambia could emulate with well-structured PPPs.
Innovation in PPP Models for Zambia
To harness the potential of PPPs fully in resolving Zambia’s energy crisis, we must adopt innovative approaches tailored to our unique circumstances. Below, we examine examples of key areas where innovative PPPs could be the master-stroke that makes the difference.
PPP Models for Rural Electrification:
Zambia could develop infrastructure for rural electrification through Community-Based PPPs. Many rural areas in Zambia remain off-grid. Community-based PPP models, where local communities partner with private developers and the government, could accelerate rural electrification. Such models ensure community buy-in and are seen to be more sustainable, as PPP models, in the long term.
The Development of Micro-grids:
Micro-grids and decentralised energy systems are another arena where PPP are primed for success. PPPs that focus on developing micro-grids could provide reliable power to remote areas, clustered communities or industrial blocks. This approach could present a transformative complement to the national grid and improve energy resilience.
Managing Energy Efficiency:
PPPs shouldn’t just focus on power generation. Energy efficiency and demand-side management are key aspects of effective energy management. Partnerships that promote energy efficiency in industries and households can help manage demand and reduce the strain on the national grid. Open market approaches (i.e., allowing free access to energy service delivery beyond Zesco), smart metring, and flexible tariff mechanisms are great examples of areas where PPPs could be effective.
Energy Finance:
Innovative energy financing mechanisms have already made their debut in Zambia. The Copperbelt Energy Corporation recently issued a Green Bond that was met with welcome enthusiasm in the market. Expanding the availability of such bonds and exploring climate finance and other innovative funding tools are further approaches towards attracting a wider range of investors to energy PPPs.
Overcoming Challenges in PPP Implementation – The Role of Government
While PPPs offer significant benefits, their implementation in Zambia’s energy sector is a potential minefield of challenges. Such challenges include regulatory hurdles, limited capacity in public institutions to manage complex PPP arrangements, and concerns about long-term affordability for consumers. Another key aspect is the ability of Government to meet all its commercial obligations where such obligations fall to be settled by Government rather the consumer.
To address the challenges in the energy sector, the government should embark on a multi-pronged strategy that combines regulatory reform, institutional strengthening, and fair risk allocation. To start with, it would be prudent to streamline the approval processes for public-private partnership (PPP) projects, simplifying bureaucratic hurdles without compromising necessary due diligence. Simultaneously, Government should invest in training and capacity building for public officials tasked with managing these complex PPP arrangements, enhancing their skills and institutional knowledge.
PPP frameworks require clear guidelines for risk-sharing between the public and private partners. This will not only attract serious investors by providing them with greater certainty, but also protect the public’s interests. Underpinning all of these efforts must be a commitment to transparency and accountability, with robust monitoring and evaluation mechanisms in place to ensure PPP projects truly deliver value for the Zambian people. Government should actively foster the involvement of local businesses and professionals in these initiatives, building domestic capacity and ensuring the economic benefits are retained within the country. By pursuing this multifaceted approach, the government can create an enabling environment that attracts the critical foreign direct investment the energy sector requires while empowering local stakeholders to participate in its growth.
Beyond PPP Hurdles of the Past
PPP arrangements of the past have often been met with financial bottlenecks emanating from the public side of the equation. The government should consider reviewing delays in financial disbursements to their private partners. Financial follow-through, or lack of it, could understandably undermine trust and confidence, which is critical to attracting the much-needed foreign direct investment the energy sector requires.
To tackle the growing debt crisis, the government should avoid simply shifting between different IPPs and suppliers, an approach that is unlikely to provide lasting solutions. Instead, Government could explore developing a comprehensive domestic debt restructuring plan to put the energy sector on a more stable financial footing. This should be coupled with thoughtful efforts to selectively open up the country to investment in complementary sectors, which could redirect capital and liquidity into energy infrastructure.
Ultimately, the government would be wise to demonstrate a firm, long-term commitment to supporting the energy sector’s development. This could involve streamlining regulations, providing clear policy frameworks, and actively courting foreign investors like the Chinese, who have significant expertise and capital to contribute. Building trust with existing IPPs through reliable contract fulfilment will also be essential to encouraging further private sector participation in public-private partnerships. Only through such a multi-pronged, collaborative approach can the government unlock the immense potential of the country’s energy sector and secure its future economic prosperity.
The path forward demands courage, innovation, and collaboration. Through concerted efforts of the government, private sector, and citizens, we can illuminate Zambia’s future, power our economy, improve lives across the nation and emerge from the darkness of this energy crisis. The time for bold action is now, and Public-Private Partnerships offer a promising path toward a brighter, more energised Zambia.
