Sisala explains Zesco's failure to pay dividends

Sisala explains Zesco's failure to pay dividends
By Joan Chirwa
Friday December 14, 2007 [03:00]

ZESCO Limited will start paying dividends to the government once its profitability levels are raised, managing director Rhodnie Sisala has said. Sisala said the power utility was currently not making enough profits to guarantee a dividend to the government owing to major rehabilitation projects undertaken as well as low electricity tariffs being charged.

He was commenting on finance minister Ng’andu Magande’s statement that investments maybe withdrawn from parastatals that were not paying dividends to the government as a shareholder.

“We have not been paying dividends to the government of late because of what is going on in the electricity industry, particularly what Zesco Limited has embarked on to try and rehabilitate and up-rate some of its equipment at different power stations in the country,” Sisala said. “This venture costs a lot of money.

We have spent millions of US dollars so far on the rehabilitation project and we are still undertaking major projects around the country to try and have a higher electricity generation capacity that can meet the increasing demand for power in this country and the region as well. Am sure you are aware that part of our equipment is currently not working because we have to rehabilitate it.”

Sisala further said Zesco, which had one of the lowest tariffs in the region, was making huge losses from charging below average fees for electricity in the country.

Zesco has already submitted an application to the Energy Regulation Board (ERB) for an upward adjustment to both domestic and commercial tariffs by between 45 and 70 per cent.

A public hearing was recently convened where, urging the power utility to review its proposed tariff rates, consumers said the magnitude of the proposed increment was not acceptable.

“Once we have our tariffs revised and the rehabilitation projects completed, we will return to profitability and that time, we will have no reasons for not paying dividends to the government as one of the shareholders of Zesco Limited,” Sisala said. “For now, what we are saying is we need to work on our returns through the revision of tariffs and complete the rehabilitation of equipment at various power stations across the country.”

Magande on Wednesday said it was unprofitable for the government to maintain its shares in parastatals that had not been paying dividends to it as a shareholder.

He said very few of the several parastatals in the country were paying dividends to the government, when the investments made were worth trillions of kwacha.

Development Bank of Zambia (DBZ), another parastatal in the country, said the institution would first study Magande’s statement before stating its position on the matter.

And Zambia Telecommunications Company (ZAMTEL) managing director Simon Tembo could not comment as his mobile phone was constantly out of reach.

And Zambia State Insurance Corporation (ZSIC) yesterday said its delay to pay dividends to the government was not deliberate but as a result of the nature of insurance business.

ZSIC managing director Irene Muyenga said insurance was a probability business as the corporation has had to settle huge claims recently to KCM and BGRIMM Explosives, making it difficult to pay a dividend to the government.

She however said the payment of dividends to the government was part of the corporation’s business plan for the coming year.