Is CEC a “middleman”?

Picture this: does an oil marketing company need to own an oil field to sell fuel or should a supermarket grow maize for it to sell mealie meal?

Generation, transmission, distribution and supply make up the four main segments of any power sector value chain, and a player can operate in one or more of the segments. One need not necessarily operate in all segments of the chain. One can exclusively generate power as a power producer while another can operate as a transmission and distribution network. Each segment of the value chain requires capital investment, and specific expertise to build and operate the infrastructure while contributing to the whole power sector and its growth.

The modern electricity industry is tending towards utilities operating as separate entities in the various segments rather than as vertically integrated entities undertaking generation, transmission, distribution and supply. You see this in the developed economies of the world where it has almost achieved perfection. Closer to home in Zimbabwe, Malawi and Angola the power sector is partially unbundled to varying extents with generation on its own. In South Africa, a similar but more far-reaching process has begun, while Nigeria has undertaken a more extensive process. With a sound understanding of how power systems are organised, the term middleman does not exist in the electricity value chain. At each stage, value is being added. CEC uses its infrastructure to service various users and adds value to the power it supplies its customers, ensuring it is fit for the customers’ requirements (delivered at the right voltage), as well as providing fail-safe power through its emergency plant, for which it must be rightly compensated.

It is informative to note that one prerequisite for generation projects to take off in southern Africa as elsewhere is the availability of (reliable) transmission infrastructure to evacuate the power in bulk to the consumption centres. Power plants would never be been built if transmission lines were not available nearby and there was no off-taker (buyer). The Kariba dam complex itself and transmission lines to the Copperbelt were built in the 1950s mainly to service the needs of the mines in the Copperbelt. The reliable market provided by CEC’s predecessor through its well-developed infrastructure was sufficient to underpin the huge loans that the then Federal government needed to source from international lenders to finance the complex and the associated bulk transmission lines to evacuate or move the power to the main load centre in the Copperbelt.