Mutapa Investment Fund has secured the relevant approvals to re-bundle State power utility, ZESA Holdings, with authorities now engaged in discussions to appraise creditors on the structural transformation.
Dr John Mangudya, Mutapa Investment Fund chief executive, said the decision was meant to streamline operations of its 100 percent-owned subsidiary, enhance efficiency and ultimately reduce costs within the electricity sector.
He said the re-bundling had been approved by Cabinet and the Zimbabwe Energy Regulatory Authority.
Dr Mangudya said this on Friday at a public lecture series organised by Zimpapers in partnership with the Harare Institute of Technology and Mutapa Investment Fund.
The event was sponsored by ZESA Holdings, NetOne, AFC Insurance, AFC Leasing, CABS, POSB, TelOne, Air Zimbabwe, FBC Holdings, BDO, Petrotrade, Willowvale Motor Industries, Homelink, Printing and Minting Company of Zimbabwe and the Export Credit Guarantee Corporation of Zimbabwe.
For nearly two decades, ZESA operated as a fragmented entity, following its unbundling around the turn of the millennium.
The power utility operated with five distinct subsidiaries, including the Zimbabwe Power Company, responsible for power generation; the Zimbabwe Electricity Transmission and Distribution Company, the Rural Electrification Agency, tasked with rural electrification and ZENT, which manufactures electrical equipment. ZESA also owns Powertel, an internet service provider.
The disintegration ultimately created inefficiencies across the electricity value chain, including multiple boards for the holding company and its subsidiaries, a costly, bloated structure and heightened bureaucracy.
In 2019, Ernst & Young, having been contracted by the Government to produce a consultancy report, recommended a re-bundling of ZESA’s energy assets to address the inefficiencies.
However, the recommendations remained unimplemented. Under the newly-approved structure, ZESA Private Limited will hold 100 percent ownership of the utility, with former standalone entities like ZPC being integrated as internal divisions to streamline operations and enhance efficiencies.
“We re-delivered and re-bundled it,” said Dr Mangudya . . . “because we want efficiency.”
“So we are now in the process of informing the creditors, the lenders, and all other stakeholders on this matter.
“We moved quite a lot. It was a very complicated matter.”
Analysts say the bloated structure of ZESA directly contributed to increased operational costs and a less efficient allocation of capital.
As such, consolidating these entities under one umbrella should, in theory, lead to significant cost savings through economies of scale, reduced overheads and more streamlined procurement processes.
The re-bundling is a necessary step towards making ZESA more financially sustainable.
Meanwhile, Dr Mangudya said a delegation from Zimbabwe was in China to discuss outstanding loans to Chinese financial institutions.
ZESA is among the State-owned enterprises that have not been able to fully repay loans obtained from the China Export-Import Bank (China Eximbank) between 2013 and 2018 to fund various key capital projects.
ZPC implemented the expansion of the Kariba hydroelectric plant and added two units at Hwange Thermal Power Station, funded to the tune of approximately US$2 billion.
Several other semi-concessionary loans were contracted by the Government for on-lending to various State-owned entities to implement critical projects.
These included the expansion of electricity generation capacity and upgrading international airports and telecommunication infrastructure.
Loans were also extended to the Airports Company of Zimbabwe, the implementing entity for upgrading Robert Gabriel Mugabe International Airport and Victoria Falls International Airport, both funded to the tune of about US$300 million.
TelOne, the State-owned fixed mobile operator, accessed nearly US$100 million to finance its network modernisation programme.
NetOne, the Government-owned mobile network operator, also benefited from a substantial amount for its three-phased broadband network expansion. According to the Public Debt Report 2024, released by Finance, Economic Development and Investment Promotion, the arrears were about US$220 million by the end of October 2024.-herald
