Business

An overview of the energy sector

INVESTMENT FORUM with MARGARET CHIMANSE
ZAMBIA’S energy sources include; electricity, petroleum, coal, biomass, and renewable energy. It is only petroleum which is wholly imported in the country, while the country is basically self-sufficient in all the other energy resources, as it has substantial unexploited reserves of these forms of energy. The country’s economy has been growing at an average of five percent per annum over the past 10 years and demand for energy has also been rising.
The demand for the most important energy source in the country – electricity has been growing at an average of about three percent per annum mainly due to the increased economic activity in the country especially in the agriculture, manufacturing and mining sectors, as well as increased activity in the region.
Furthermore, the Zambia’s growing economy has also led to an increase in the demand for the other forms of energy such as petroleum and coal, as these are key factors of production and operations in most economic sectors. The demand for renewable energies has also seen significant growth in the recent years as the market explores alternative sources of energy, with renewable energies proving to be a viable alternative.
There is enormous potential for investment opportunities in the energy sector to meet the Zambia’s demand for the various forms of energy. Investment opportunities exist in electricity generation while hydro power is the most important energy source in the country after wood fuel contributing about 10 percent to the national energy supply.
It is estimated that Zambia possesses forty percent of the water resources in the Southern African Development Community. Zambia has about 6,000 MW unexploited hydro power potential, while only about 2,434.3 MW has been developed. On the other hand, the demand for power in the various sectors of the economy has grown rapidly over the years.
Zambia has been experiencing positive economic growth in the recent past with an average real GDP growth rate of 6.4 percent recorded between 2011 and 2015. The economic expansion has led to an increase in demand for power. As a result of expansion in economic activities especially in the mines, the peak demand for electricity in Zambia increased has increased. Given these factors, the demand for electricity in the country is expected to exceed 2,500 MW by the year 2020.
Following the amendment to the second schedule of the ZDA Act, power generation has now been declared a priority sector. This amendment was in recognition of the need to reduce the cost of developing power plants and attract independent power producers to increase generation capacity in Zambia and meet the growing demand for power for the productive sectors especially mining.
It is important to note that a number of new investment projects in agriculture and mining which will be completed within the next one to three years, will also significantly increase the demand of diesel consumption in the Zambia.
Investment opportunities exist in the petroleum industry in the country with regards to upstream petroleum projects, as well as downstream petroleum projects.
Recent exploration work for petroleum covering parts of North-Western, Western and Eastern provinces of Zambia, using the microbial prospecting for oil and gas technique, indicated that the Okavango and North Luangwa basins have potential for oil and gas. Government has tendered the oil blocks for oil and gas prospecting by private sector.
The Downstream petroleum sector in Zambia has a deficit in bulk storage of petroleum products. There is currently a legal requirement that mandates all Oil Marketing Companies operating in Zambia to keep an equivalent of 15 days of their working petroleum stocks. In order to address this situation, the government is looking towards engaging a strategic partner to construct a 50 million litre petroleum terminal in Lusaka on a build operate and transfer basis.
Zambia’s current proven coal deposits are located in the Southern Province and estimated to be about 80 million tonnes. Other probable coal reserves are in Luangwa North, Luano, Lukusashi in the Luangwa Valley and Kahare, Chunga and Lubaba in the Western Province. Currently Zambia only has two coal mines – the major one being the former government owned Maamba Collieries Limited, and the other being Collum Coal Mine, both in the Southern Province.
Although Zambia is endowed with nuclear and renewable energy resources, efforts to harness these resources have been minimal. The government recognises the need for promoting renewable energy and clearly stated its intentions in the draft renewable energy feed in tariff policy that was finalised in April, 2015. This policy is intended to promote private sector participation in the renewable energy sector. The country has potential for the following renewable energies; solar energy, wind energy, geothermal energy and mini/micro hydros.
The Act provides for investment thresholds that have to be met to qualify for fiscal and non-fiscal incentives. Projects that qualify may be new or existing ones undergoing expansion or modernisation. These are the categories of investors who can be considered under the ZDA Act.
Investors who invest not less than US$500,000 in the multi facility economic zone, an industrial park, a priority sector and invest in a rural Enterprise under the ZDA Act, are entitled to fiscal incentives. In addition to fiscal incentives, the above category of investors is entitled to the non-fiscal incentives such as investment guarantees and protection against state nationalisation and free facilitation for application of immigration permits, secondary licences, land acquisition and utilities.

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