Joint UNDP/World Ba-nkEnergy Sector Management Assistance Program

Activity Completion Report

No. 060/86

Country: ZAMBIA

Activity: ENERGY SECTOR INSTITIITiONAL REVIEW

NOVEMER 1986

Report of the joint UNDP/iMrid Bank Energy Sector Managemem Assistance ProgramThis document has a restricted distribution. Its contents may not be disclosed withoutauthorization from the Govemment, the UNDP or the World Bank.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

ENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAM

The Joint UNDP/World Bank Energy Sector Management AssistanceProgram (ESMAP), started in April 1983, assists countries in implementingthe main investment and policy recommendations of the Energy SectorAssessment Reports produced under another Joint UNDP/World BankProgram. ESMAP provides staff and consultant assistance in formulatingand justifying priority pre-investment and investment projects and ir.providing menagement, institutional and policy support. The reportsproduced under this Program provide governments, donors and potentialinvestors with the information needed to speed up project preparation andimplementation. ESMAP activities can be classified broadly into threegroups:

- Energy Assessment Status Reports: these evaluate achieve-ments in the year following issuance of the originalassessment report and point out where urgent action isstill needed;

- Project Formulation and Justification: work designed toaccelerate the preparation and implementatious of investmentprojects; and

- Institutional and Policy Support: this work also frequentlyleads to the identification of technical assistancepackages.

The Program aims to supplement, advance and strengthen theimpact of bilateral and multilateral resources already available fortechnical assistance in the energy sector.

Funding of the Program

The Program is a major international effort and, while the corefinance has been provided by the UNDP and the World Bank, importantfinancial contributions to the Program have also been made by a number ofbilateral agencies. Countries which have now made or pledged initialcontributions to the programs through the UNDP Energy Account, or throughother cost-sharing arrangements with UNDP, are the Netherlands, Sweden,Australia, Switzerland, Finland, United Kingdom, Denmark, Norway, and NewZealand.

Further Information

For further information on the Program or to obtain copies ofcompleted ESMAP reports, which are listed at the end of this document,please contact:

Division for Global and OR Energy Strategy andInterregional Projects Preinvestment Div. IT

United Nations Development Energy DepartmentProgram World Bank

One United Nations Plaza 1818 H Street, N.W.New York, N.Y. 10017 Washington, D.C. 20433

Im'II

ABBREVIATIONS

CSO Central Statistical OfficeDOE Department of EnergyEDI Economic Development Institute (World Bank)ESMAP Joint UNDP/World Bank Energy Sector Management Assistance

ProgramFD Forestry DepartmentFNDP Fourth National Development Plan (1987-91)

MLNR Ministry of Lands and Natural ResourcesMM Ministry of MinesMPTC Ministry of Power, Transport and Communications

NCDP National Commission for Development PlanningNEC National Energy Council

TOE Tonne of Oil Equivalent

ZAFFICO Zambia Forestry and Forest Industries CorporationZEqCO Zambia Electricitv Supply CorporationZIMCO Zambia Industr; and Mining Corporation

TABLE OF CONTEM

Page

BACKGROUND AND SUMMARYo............................ ..oo.. i

I * INTRODUCTION... ..* ..o. ... .. o**.*.....*.*..... ..eoo *. * 1

II. OVERVIEW OF ENERGY POLICY ISSUESe.o..o.... *. .o**o**..**.*. 3

III. INSTITUTIONS IN THE ENERGY SECTOR ......................oat..o. 7Overviewo.....o .. *.*..e..o...oo..oo......e.oo.o..o.o..o 7Evolution of the Current Institutional Structures....... 7

Central Government Agencies............................... 9The Ministry of Power, Transport and Communications..... 9Other Energy Ministries.. o.... ... o............... ..... 12The National Commission for DevelopmentPlanning (NCDP)...o.o....... . .... ............... . 13

The Central Statistical Office (CSO).................... 15The National Energy Council................. ........... 15ZIMCO and the Public Energy Corporationso.......... oo. 16

IV. OPTIONS AND RECOMMENDATIONS FOR INSTITUTIONAL REFORM........ 19Bakgondkoogorooos ounedooooo*oo*oo 19Strengthening the Coordination of Energy Stvategyand Investments....oo...oo ... o...e.. oo..... o.o.o.ooo. 19

Future of the National Energy Councilouncil.ooooo.....o. 20Internal Organization and Procedures of the MPTC C.eee.o 22Internal Organization of the Department of Energyy.o..oo 23Role of ZIMCO.o... ooo.. . o..ooo. oo..o..oo......... . .oo 24

V. WORK PROGRAMS OF THE ENERGY SECTOR INSTITUTIONSoI.......sees 26The Need for an Energy Sector Strategy.o......o.ooo.. 26Energy Data Collection and nalysis................nal si 27Recommended Work Program of the Department of Energy.... 28Review of Energy Legislation...........................,, 30Summary of the Recommended Work Program of theDepartment of Energy..... ............ ................ 30

Nation-l Energy Council.o.o. ooo oo.. oo.... o.. o. ooo.o..o. 32ZIMCO and the Energy Supply Corporationssoooo.oo.o.o.... 33

VI. STAFFING, TRAINING AND TECHNICAL ASSISTANCE.oo.....**s..s.. 34Introduction............... . o... o .oo. .o.o.... ooe..oeo. 34Staffing Needs of the Department of Energyoergyoo.o..... 34Energy Staffing Needs of ZIMCO and its Subsidiaries..... 36Training of Energy Analystsa ly.......o..os ts...s...... 37Establishment of an Energy Training Course.......o...... 38Promotion Criteria..... ... o..e ... oo..oo.o... oo..ooooo 39Technical As sistance..o.o.e. o .. ooo...ooo....eooeooo 39

TABLE

2.1 Zambia - Summxry Energ; Balance, 1985........................ 4

FIGURES

3.1 Internal Strictuire of the Ministry of Power, Transportand Communications. . ........ .� . ....... ....... ***^... 9

3.2 Structure and Staff of the Department of Energy as atDecember 1985................ 10

4.1 Recommended Structure of the Department of Energy ............. 246.1 Long-Term Staffiag Needs of the Department of Energy.......... 36

ANNEXES

1. List of Persons Consulted ............................ **oooo. 402. Extract from National Energy Council Act

(No. 13 of 1980)............................................ 423. New Posts in the Department of Ener g y 434. The LEAP Modelling .......... 47............. ........... 475. Outline of Economic Development Institute Energy Course....... 49

BACKGROUND AND SUMMARY

Background, Objectives and Scope of the Report

1. The Energy Assessment aeport on Zambia 1/, issued in January1983, and the follow-up Energy Assessment Status Report 2/, issued inAugust 1985, both observed weaknesses in Zambia's energy sectorinstitutions and procedures for energy investment planning and polisyanalysis. As a consequence, the country was seen to lack a prioritizedand soundly-justified energy sector policy and investment strategy. Thisin turn was deterring international donors from making commitments to theenergy sector at a time when external resources were scarce, yet badlyneeded to rehabilitate existing energy supply capacity, ensure continuityof production and improve the balance of trade.

2. -his Energy Sector Institutional Review 3/, executed under theJoint UNDP/World Bank Energy Sector Management Assistance Program(ESMAP), analyzes the capability and performance of energy sectorinstitutions and proposes practical solutions to the observedshortcomings. Its objective is to help the Zambian authorities developenergy sector institutions and a planning system capable, perhaps withsome initial technical assistance, of producing and continuously updatinga sound strategy and investment program for the energy sector.

3. For the purposes of the analysis, the energy sector is definedto include arrangements for the supply, distribution and use of the fuelsrequired to produce heat, light and motive power for industry,agriculture, commerce, households and other consumers. In common withmost other developing countries, Zambia's energy sector is seen tocomprise two parts: (1) a formal commercial sector where fuels arebought and sold; and (2) a non-commercial (subsistence) sector wherefuels are gathered for direct use by consumers. Nowever, the linebetween these two is not hard and fast and is shifting constantly.

1/ Zambia: Issues and Options in the Energy Sector Report no. 4110-ZAof the Joint UNDP/World Bank Energy Sector Assessment Program,January 1983.

2/ Zambia: Energy Assessment Status Report Report no. 039/' of theJoint UNDP/World Bank Energy Sector Management Assistance Program,August 1985.

3/ The report is based on the findings of a mission by Messrs.Robin Broadfield (ESMAP) and Thomas A. Kennedy (Ccusultant) toZambia in November-December 1985.

- ii -

4. The role and effectiveness of the institutions involved inenergy strategy axid investment planning are examined. At the center arethe Government Ministries, particularly the Ministry of Power, Transportand Communications (MPTC). It is responsible for oversight of the powersubsector and, through its constituent Department of Energy (DOE), forpolicy advice on a wide range of energy sector issues, including ruraland household energy and energy conservation. Jointly with the NationalCommission for Development Planning (NCDP), the DOE prepared the EnergyChapter of the Fourth National Development Plan (FNDP), spanning theyears 1987-91.

5. Other energy ministries include the Ministry of Mines (MM),which is responsible for coal production and petroleum exploration, andthe Ministry of Lands and Natural Resources (MLNR), which is responsiblefor forestry. The National Energy Council (NEC) is a semi-independentstatutory body with broad consultative and advisory functions over thewhole energy sectore Finally, there are the energy supply corporations,most of which are in the public sector and operate urder the generaldirection of the Zambia Industrial and Mining Corporation (ZIMCO).

Summary of Principal Recommendations

6. A review of Zambia's procedures for energy strategy analysisand investment planning, and of the capability of the institutionsinvolved, suggests that progress has been made in both areas with thepreparation of the Fourth National Development Plan. Although the firstdraft of the plan lacks an integrated strategy for the energy sector andin-depth investment and policy analysis, it brings together many of theissues and investment options that must be considered in the formulationof such a strategy.

7. To further strengthen the process of energy strategyformulation, three principal enhancements to the current system arerecommended: (i) designation of a single government agency asresponsible 2or overall energy policy and strategy formulation; (ii)provision to that agency, in a timely manner, of essential strategicinformation on the current and prospective performance and investmentproposals of organizations in the energy sector; and (iii) development,in that agency and the energy supply organizations, of the staffcapability needed to perform the policy and investment analysis requiredfor energy strategy development. A series of specific, practicalrecommendations as to how these enhancements could be achieved are setout below.

8. Recommendations for Institutional Strengthening and Reorganiza-tion

(a) The Department of Energy in the Ministry of Power, Transportand Communications should formally be given lead responsibility

- iii -

for the coordination of Zambia's national energy strategy andanalysis of associated policy initiatives.

(b) The title of the Ministry of Power, Transport andCommunications (MPTC) should be changed to the Ministry ofEnergy, Transport and Communications (METC) to affirm itsrecommended sector-wide responsibilities.

(c) Because it lacks the necessary decision-makir.g authority andits work inevitably duplicates that of the Department ofEnergy, the National Energy Council should be either: (i)disbanded, and its Secretariat absorbed into the Department ofEnergy, which would take over sponsorsh.p of the Council's R &D Committee; or (ii) restructured, to make its role explicitlyadvisory and consultative. In view of its potentially limitedimpact as an advisory body, the former course of action isrecommended.

(d) To streamline power subsector planning and policy analysis,consideration should be given to merging the MPTC's PowerStream into the Department of Energy to form a new ElectricitySection.

(e) To better integrate the work of the Department of Energy intothat of the Ministry: (i) regular internal reporting meetingsshould be established; (ii) the Department should, as a matterof course, be consulted on all energy matters; (iii) allrelevant documents should be copied to the Department; and (iv)the Department should ensure that its work is communicated tothe rest of the Ministry on a regular basis.

(f) To reflect its expanded responsibilities, the Department ofEnergy should be re-organized into four Sections, compared tothe present three, by the addition of the Electricity Sectionproposed in (d) above.

(g) To ensure adequate staffing of the Department, in relation toits proposed responsibilities, the posts of Deputy Director,Senior Economist and a Senior Electrical Engineer should beestablished and suitably qualified staff appointed over thenext !welve months.

(h) To facilitate the coordination of energy sector investmentanalysis and planning, the ZIMCO corporate planning processshould be synchronized and integrated with the Government'splanning cycle.

(i) ZIMCO's Office of the Technical Adviser - Energy should beresponsible for the analysis and presentation of investment andpolicy proposals of the public energy supply corporations and

- iv -

should be strengthened by the recruitment of a Senior EnergyEconomist.

9. Priority Tasks of the Energy Sector Institutions

(a) The Department of Energy (DOE) should participate in thepreparation of a National Energy Strategy. This should bebasee on realistic forecasts of energy demand and analysis ofexisting supply capacity and costs, and outline a least-costinvestment program and associated package of policy measures tomeet the forecast demand for energy. As indigenous planningcapability is limited, outside technical assistance sI.uld beused to complement local manpower resources in its preparation.

(b) The DOE's Planning Section should estimate price and incomeelasticities for energy and individual fuels (an essentialelement in pricing policy), prepare a systematic program ofsurveys and analysis to improve the coverage and quality ofnational energy data, and prepare a regular publication onenergy statistics and trends.

(c) The DOE's Household and Rural Energy Section shoulli progressfrom consultative and organizational work into more specific,project-oriented activities. These should include the economicevaluation of suburban household energy options and appropriaterural applications for renewable energy technologies.

(d) The DOE's Commercial Energy and Conservation Section shouldcomplete a first review of energy conservation potential andoptions in the industrial, mining and transport sectors, makingfull use of available technical assistance resources. Itshould then proceed to outline a national energy demandmanagement program, including: (i) the setting of national andsectoral energy consumption targets; and (ii) the specificationof resources and measures to achieve them, including ecoromicenergy pricing.

(e) The proposed DOE Electricity Section should review the invest-ment proposals of ZESCO for consistency with the nationalenergy strategy and anticipated resource availability andadvise on appropriate electricity prices, based on the economiccost of supply and ZESCO's financial needs.

(g) To ensure an adequate legal framework for energy policy andplanning, the MPTC should work with the Legal AffairsDepartment to produce a consolidated update of all the lawsrelating to energy development, production, marketing and use.

I. INTRODUCTION

1.1 The objectives of this Report, prepared by the joint UNDP/WorldBank Energy Sector Management Assistance Program (ESIIAP), are to reviewthe effectiveness of the institutions and procedures for determiningenergy strategy in Zambia and to recommend appropriate improvementstherein.

1.2 These issues were raised and analyzed in the Zambia EnergyAssessment Report, issued in January 1983 under the title "Zambia:Issues and Options in the Energy Sector", and the subsequent "EnergyAssessment Status Report" of August 1985. Both these documents stressedthe need for institutions and procedures in the energy sector to providean effective framework for the formulation, prioritization endimplementation of a coherant set of energy investments and policies forthe sector as a whole. By an "effective framework" is meant a structureof institutions, linkages between them, and clear responsibilities fordecision-making which enable issues to be identified, policy and invest-ment options to be analyzed, priorities to be set, actions to be takenand progress to be monitored to ensure that energy is made available inadequate quantities, at minimum cost and used in the best interests ofthe country and its people.

1.3 A comprehensive "energy strategy", covering both investmentsand policy, is necessary in Zambia for several reasons. One reason isthat there are only a small number of energy suppliers (monopolisticpublic utilities and oligopolistic oil companies) whose individualactions have a major impact on the market. A second is that, while theelasticity of demand for energy as a whole is low, there is considerablepotential for substituting one fuel for another, and hence the elasticityof demand for individual fuels is high. A third is that the energysector is characterized by considerable international uncertainty,particularly as to the cost and availability of supply and the potentialfor export, as recent upheavals in the world petroleum marketdemonstrate. Fourthly, investment costs are often high and lead timeslong, in a situation where resources are scarce and mistakes costly.Together, these features argue, particularly in the context of a less-developed economy such as Zambia, for some degree of central review andguidance of energy investments and policy through the formulation andimplementation of an energy sector strategy.

1.4 The Mission that undertook this review of Zambia's energyplanning system began its work in Lusaka on 11 November 1985 and stayedfor a period of four weeks. During that time, discussions were held withall the main Government agencies and various other bodies involved in theenergy sector (Annex 1). Towards the end of the Mission's visit, ameeting was held with representatives of the Government, the NationalEnergy Council, ZIMCO and ZESCO to discuss an Aide Memoire, whichoutlined some of the preliminary conclusions of the Mission' s inquiry.There was broad agreement with the Mission's conclusions and with the

- 2 -

direction of its recommendations. However, contrary views were expressedon some issues which have been L-4en into account in this final report.

1.5 Chapter II of the report summarizes the main characteristics ofZambia's energy situation and the policy and planning challenges whichthe energy institutions must face over the next few years. Chapter IIIreviews the role and petformance of the main energy sector institutionsin three groups: Central Government; the National Energy Council; andthe energy corporations within the ZIMCO organiaation. Chapter IV dealswith options and recommendations for institutional reform. Chapter Vreviews the work programs of the various sector organizations andrecommends some new priority tasks. Finally, Chapter VI deals withstaffing, training and technical assistance requirements.

i.6 The Mission would like to record its appreciation for theexcellent assistance and cooperation which it received from all theindividuals and organizations in Zambia with whom it had dealings. Ofparticular assistance was the Ministry of Power, Transport andCommunications, which provided office accommodation, transport, secre-tarial services and much valuable information and advice.

- 3 -

II. OVERVIEW OF ENERGY POLICY ISSUiES

2.1 In Zambia, as in any economy, the "energy sector" consists ofthe arrangements for the production, distribution and use of the fuelsrequired to produce heat, light and motive power for households,commerce, agriculture and industry. The objective of the country'senergy strategy is to ensure that these resources are supplied and usedwith maximum efficiency, in accordance with national needs andobjectives.

2.2 In common with most other developing countries, Zambia's energyeconomy is in two parts: (1) a formal, commercial, sector where fuelsare bought and sold for household and industrial use; and (2) a non-commercial (subsistence) sector where fuels are gathered, mainly in therural areas, for direct use by consumers. The significance of thisdivision, from a policy point of view and in the context of the presentReport, is that the commercial sector is institutionalized and relativelywell-documented, and so amenable to conventional quantitative analysis,policy appraisal and planning techniques. In contrast, the non-commercial sector has little or no institutional framework and is poorlydocumented, and so requires different methods to assess and improve itsperformance. The boundary between the two sectors is also not a hard andfast one and is const:antly shifting. For example, the supply offuelwood has to meet the demands of both cash and subsistenceconsumers. Similarly, the extent to which the supply of commercialfuels, such as electricity or petroleum products, penetrate thesubsistence sector, is itself an important and dynamic ingredient ofenergy policy, with implications for welfare and the structure of energydemand.

2.3 The energy sector in Zambia has been fully desr-ribed andanalyzed in the Energy Assessment and Status Reports of 1983 and 1985.Hence it need not be reviewed in detail here. However, the structure ofthe country's energy institutions needs to reflect the realities of theenergy economy, as well as the policy and planning tasks which arerelevant to it. For this reason, a brief recapitulation of the sector'smajor characteristics may be useful.

- 4 -

Table 2.1: ZAMBIA - SUMMARY ENERGY BALANCE, 1985(Million toneies of oil equivalent)

Coal and Total TotalPetroleum Coke Electricity Commercial Woodfuel Energy

Production - 0.4 2.5 a/ 2.9 4.8 b/ 7.7

Imports 0.7 - - 07 - 0.7

Total Primary 0.7 0.4 2.5 3.6 4.8 8.4SuppIly

Transmission/ (0.1) - (0.3) (0.41 - (0.4)

TransformationLosses

Net Supply 0.6 0.4 2.2 3.2 4.8 8.0

Exports - - (0.7) (0.7) - (0.7)

Domestic Final 0.6 0.4 1.5 2.5 4.8 7.3Consumption

of which:Mining 0.2 0.2 1.1 1.5 - 1.5Industry 0.1 0.2 0.3 0.6 - 0.6Transport 0.3 - _ 0.3 - 0.3Household/ - - 0.1 0.1 4.8 4.9

Others

a/ Converted on thermal replacement basis (lGwh = 250 toe)_/ Based on preliminary results of UNDP/FAO Wood Consumption and Resource Survey

Sources: Department of Energy; FAO/UNDP Wood Consumption and Resource Survey;ZIMCO; Mission estimates.

2.4 As Table 2.1 shows, total domestic energy consumption in 1985amounted to about 7.3 million tonnes of oil equivalent (mtoe), out of atotal primary supply of about 8.4 mtoe. Just over 1 mtoe were exportedor used in energy conversion processes. Some of the key features whichemerge from the table are:

- 65% of total energy is provided by woodfuels;

- 20% of total energy (60% of commercial energy) is provided by(hydro) electricity;

- 50% of petroleum is consumed in transport and a further 20% inindustry;

- 60% of all commercial energy is consumed in the miningindustry.

2.5 Within the general economic context of persistent stagnation ingrowth and severe financial and foreign exchange constraints, the majorissues of energy policy have been identified as:

(a) substitution of domestic for imported energy, where economic;

(b) rehabilitation and optimization of existing supply systems;

(c) the adoption of appropriate pricing policies and effectiveconservation measures;

(d) development of a national energy strategy, based on realisticestimates of demand, including a prioritized investment programdesigned to satisfy demand at least economic cost.

2.6 When these broad objectives are translated into specificplanning issues, the following are seen as some of the main optionsrequiring review and analysis:

Electricity: Extension of the transmission and distribution system toincrease the availability of low-cost surplus power andfacilitate substitution of petroleum and woodfuels byelectricity;

Improved maintenance and reinforcement of the power systemto increase reliability and reduce losses;

Future of power exports, particularly to Zimbabwe;

Potential for renewable energy schemes in remote areas.

Petroleum: Rehabilitation of the Tazama oil pipeline;

Energy efficiency improvements to the Indeni Refinery;

Review of opportunities for cost-effective substitution ofoil by other fuels, especially in mining and industry;

Continuation of the oil exploration program.

Coal: Rehabilitation of Maamba Colliery;

Improvement of coal marketing and transportation;

Feasibility of substituting waste coal briquettes forcharcoal in household use.

Woodfuels: Development and extension of afforestation and agro-forestry programs;

- 6 -

Improvement of the efficiency of charcoal manufacture andmarketing;

Encouragement of greater efficiency in woodfuel andcharcoal utilization.

Conservation: Promotion of more efficient fuel use in all sectors,especially in transport and industry, through 'goodhousekeeping' measures and investments, where appropriate.

2.7 The energy institutions should be capable of: (i) analysingthese and other key energy sector issues individually; (ii) assessingtheir interrelationships; (iii) developing a consistent and coordinatedenergy sector strategy, including appropriate policies and investmentprojects; (iv) overseeing project implementation and execution; and (v)monitoring project performance and that of existing sectororganizations. In order to carry out these functions, the institutionsneed effective internal 3tructures, qualified staff, clearrespcnsibilities, and access to accurate and timely energy data andproject information.

III. INSTITUTIONS IN THE ENERGY SECTOR

Overview

3.1 This chapter reviews the present organization and roles ofinstitutions in the energy sector and identifies certain areas whereperformance needs to be strengthened. Recommendations and options fordealing with these areas are contained in Chapter IV.

3.2 There are three main elements of the institutional structure inZambia's energy sector:

(a) Central Government, which nominally is responsible for energypolicy and planning and for oversight of the fuel industries.The main Ministries concerned are the Ministry of Power,Transport and Communications (MPTC), within which is locatedthe Department of Energy (DOE); the Ministry of Mines, which isresponsible for coal and petroleum exploration; the ForestryDepartment and the Department of Natural Resources under theMinistry of Lands and Natural Resources (MLNR); and theNational Commission for Development Planning (NCDP), andCentral Statistical Office (CSO)? both under the Ministry ofFinance.

(b) The National Energy Council (NEC), a semi-independent statutorybody, with twelve nominated members and a small secretariat,which has wide advisory and consultative functions over thewhole energy field.

(c) The Energy Corporations, responsible for fuel supply, which arealmost wholly in the public sector and mostly operate under theumbrella of the Zambia Industrial and Mining Corporation(ZIMCO). They include the Zambia Electricity SupplyCorporation (ZESCO), Maamba Colliery, Tazama Pipelines, IndeniRefinery, the Zambia Forestry and Forest Industries Corporation(ZAWFICO) and two of the five oil companies which operate inthe country.

Evolution of the Current Institutional Structure

3.3 Two developments in the 1970s shaped the evolution of institu-tional responsibilities for energy policy and planning. One concerns theorganization of the electricity subsector, for long the major supplier ofcommercial energy in Zambia. In 1970, ZESCO was established as anational supply authority by the amalgamation of a number of separatemunicipal and other electricity authorities. In so doing, it took overthe traditional bulk supply role of the Central African Power Corporationand responsibility for all power transmission and distribution, with theexception of the Copper Belt, which continued to be supplied by theCopperbelt Power Company. The MPTC retained overall political

- 8 -

responsibility for the industry, but many of the Ministry's technical andsupervisory functions were transferred to the new Corporation. TheMPTC's Electrical Engineering Department, which had been responsible forthe general coordination and monitoring of the former electricityauthorities, was dissolved. In the process, the Ministry effectivelylost its direct regulatory and planning role in the industry's affairs,and its role in electricity matters became largely administrative.

3.4 The other influential development was the deterioration inZambia's economic situation, due primarily to the declining price forcopper and the second major escalation of world oil prices in 1979. Inresponse to these pressures, it was decided to establish a NationalEnergy Council to provide policy review over the whole energy field. Therelevant National Energy Council Act was passed in September 1980 (seeAnnex 2).

3.5 At an early stage, the Council, aware of its lack of executiveauthority, urged the MPTC to set up a Department of Energy. There issome disagreement now about whether the intention was primarily toreplace the former Electrical Engineering Department or whether it wasintended that the Department's mandate should extend over the supply anduse of all fuels. Clearly, the Department's direct executive functionscould not extend to the operational aspects of coal mining, petroleumexploration antd woodfuels, which were within the jurisdiction of twoother Ministries. However, it could potentially exercise such powers inrelation to electricity and the end-use aspects of coal, woodfuel andpetroleum. Also, if the emerging concept of an "tenergy strategy" was tohave any meaning, then clearly the Department, or some other Governmentinstitution, had to be concerned with broad energy sector issues, such asinterfuel substitution, pricing, conservation, and overall investmentpriorities.

3.6 In the event, after it was formally set up in 1982, theDepartment's role developed in the direction of overall energy strategyformulation. This was in large measure due to the priorities set by thefirst (expatriate) Director, who focussed on the development if data andinformation systems and basic energy planning techniques and capabil-ities.

3.7 Meanwhile, the National Energy Council saw its role developingin a similar "energy planning" direction, thus creating the conditionsfor ambiguity in the respective roles and responsibilities of the twoorganizations. The inevitable result is overlapping functions,duplication of effort and a certain amount of acrimor.y. Before examiningoptions for handling this and other institutional issues, the structureand functions of the full range of energy sector institutions need to bebriefly described.

- 9 -

Central Government Agencies

The Ministry of Power, Transport and Communications

3.8 The MPTC is organized in three 'streams', each dealing with oneof its principal sectoral responsibilities (see Figure 3.1). As wasnoted in paragraph 3.3 above, the MPTC lost much of its regulatory andplanning role in power with the formation of ZESCO. In consequence, thePower Stream is now very small. The Department of Energy standsalongside the Power Stream, with its Director reporting to the PermanentSecretary, but some of its work comes through Power Stream officials.

Figure 3.1: INTERNAL STRUCTURE OF THE

MINISTRY OF POWER, TRANSPORT & COMMUNICATIONS

MINISTER

MINISTER MINISTER

OF OFSTATE PERMANENT STATE

SECRETARY

I I ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~IUnder Secretary I Under Secretary

Transport I Power and Communications

Transport Stream Power Stream Communications Stream

(Asst. Sec., Principal,

, Exec. Officer)

DEPARTMENT OF ENERGY

IDirector

II

Planning and Urban,Household Commercial Energy

Administration and Rural Energy and Energy Conservation

3.9 The Department of Energy has a Director and staff of thirteenprofessionals, organized in three sections: Planning and Administration;Commercial Energy and Conservation; and Household and Rural Energy (seeFigure 3.2). Five of the staff are expatriate advisers, working onshort-term (2-3 year) contracts, provided through bilateral technicalassistance arrangements with Denmark (2 advisers in the Planning Section,and one who acts as adviser to the Director and is his de facto deputy),the United Kingdom (one adviser dealing with Commercial Energy andConservation), and France (one adviser covering Household and Rural

- 10 -

Energy). With the exception of the Director, the Zambian proferssionalstaff are 'elatively young and junior in rank. Because of difficultiesin establishing senior positions and recruiting senior local professionalstaff, the planning advisers in particular have tended to perform a'section head' rather than an advisory or counterpart role.

3.10 The Department is physically separate from the Ministryheadquarters and is housed poorly. The Planning Section and the Director(together with the secretarial and support staff) are located in sixsmall (about 13.5 sq. metre or 144 sq. foot) offices with up to threestaff in each. The two computers and peripherals are in one of theserooms and are sometimes out of service because of the heat andhumidity. The two other sections each have an office in a separatebuilding and are equally overcrowded. The issue is not simply one ofs2aff comfort, although this is by no means unimportant. It alsoadversely affects working efficiency, relations with the rest of theMinistry, and presents a makeshift image to visitors from otherMinistries and organizations.

Figure 3.2: STRUCTURE AND STAFF OF THEDEPARTMENT OF ENERGY AS AT DECEMBER 1985

DIRECTOR| - ADVISER (TA, Denmark)

: I ' PLANNING COMMERCIAL ENERGY HOUSEHOLD

& & AND RURALADMINISTRATION CONSERVATION ENERGY

1 Economist 1 Chem Engineer 2 Mech Engineers2 Planners 1 Elec Engineer1 Tech Asst 1 Adviser JTA, France)

(Computers) 1 Adviser (TA, UK)

2 Advisers (TA, Denmark)

Total Staff: 9 Zambian Professionals5 Zambian Secretarial & Support Staff5 Expatriate Advisers

19

3.11 The Planning and Administration Section has a staff of six. Ithas seen as its major tasks as: (i) the development of an energy datasystem; (ii) the regular updating of energy balances; and (iii) theexamination of alternative supply/demand scenarios, with the generalobjective of formulating a national energy plan. Initially, the datasystem was set up on the Department's IBM Personal Computer. Morerecently, it has been enhanced by acquisition of a second computer and a

- 11 -

simple energy planning model known as LEAP (LDC Energy AlternativesPlanning System, described in Annex 4). This model, on which theDepartmental staff have been trained, has been used in several otherAfrican countries with generally limited results.

3.12 The Section's early emphasis on basic data collection hasdiminished as there is now a fairly comprehensive data system inexistence. However, there are still several major data gaps, especiallyin the areas of energy consumption, costs, prices and operationalinformation on the electricity and petroleum sectors. In terms ofsubstantive activities, the Section has participated in a countrywideenergy survey with the NEC and the University of Zambia and hasundertaken economic evaluation of diesel power plants and ruralelectrification projects. It is also responsible for the Departmentsbudgetary arrangements and general staffing and administrative matters,tasks that have grown in the past year.

3.13 During the latter part of 1985, the Section strengthened itslinks with other bodies concerned with energy through preparation of theFourth National Development Plan (FNDP). It shared the Plan secretariatrole in the Energy Sector Committee with staff of the NCDP, and waslargely responsible for the drafting and coordination of the EnergyChapter.

3.14 The Commercial Energy and Conservation Section is staffed by anelectrical/energy conservation engineer and a chemical engineer. Anexpatriate adviser, provided by the UK technical assistance program, iscurrently attached to the sectior. The Section's first activity was aseries of industrial energy efficiency surveys to assess the potentialfor improved energy management, economic fuel substitution and theprospects for industrial energy conservation. From the results, itappears there is some potential for cost-effective switching from oil-fired to electric boilers, with substantial cost savings to be derivedfrom cheaper fuel, reduced storage and transport charges and lowermaintenance costs.

3.15 Th's initial program identified potential energy savings andprovided useful training and experience for the staff (and someindustrial managers) in the analysis of conservation options. If it isto be effective, there needs to be: (a) continuous review of theresults, in the light of changing fuel prices; (b) follow-up to theinitial surveys and audits with plant management and engineers; and(c) an extension of conservation analysis into the heavy energy-consumingsectors of mining and transport. It is intended that these steps beinitiated during 1986.

3.16 The Section has also been given responsibility for fossil fuelspolicy, i.e., the downstream aspects of petroleum and coal. However itsexpertise in these areas is limited, except for that of the expatriateadviser, who has a long background in the petroleum industry. While coalmining is primarily the responsibility of the Ministry of Mines, as is

- 12 -

the program of oil exploration, the Section needs local staff withknowledge of the technical, financial and economic aspects of theseindustries to make an effective contribution in such areas as review ofrelative investment priorities, pricing policy and interfuel substitutionanalysis.

3.17 The Household and Rural Energy Section has a staff of twoengineers with good potential. There is also an expatriate adviserprovided by the French Government. Originally, the Section was concernedwith new and renewable sources of energy, but its scope has since beenbroadened to cover the issues of fuel availability and use by householdsin the rural, urban and suburban areas of the country.

3.18 The Section's overall aim is the recommendation of specificmeasures, with the coop-ration of local organizations and communities, toimprove energy supply and utilization efficiency in the rural andsuburban areas. Its work covers three main sets of activities:

- assisting local authorities and other government and unofficialfield agencies in formulating and implementing local energyplans;

- participating with other institutions in public programs with asignificant energy content (e.g., forestry and water supply);and

- identifying and helping to establish appropriate conditions forthe development and diffusion of cost-effective and reliablerenewable energy technologies.

3.19 The Section's program has a strong institutional component, inwhich it is seeking to act as a catalyst and stimulus in making concernwith energy an integral part of the rural, urban and suburban developmentprocess. It is adopting a grass roots or "bottom up" approach to energyplanning, rather than the more conventional, quantitative, "top down"procedure. This is an imaginative approach which, if combined witheconomic and financial analysis of policy and investment options, shouldyield solid results in the longer term. The Section is indeed nowseeking to monitor and apply economic appraisal techniques to the supplyand use of charcoal; energy options for water pumping, irrigation andsmall-scale industry; deforestation around the major towns; and economicopportunities for suburban electrification. It will be important toensure that this second stage of the Section's work gathers momentum andthat resources are provided and opportunities are taken to define andundertake such concrete analytical tasks.

Other Energy Ministries

3.20 The Ministry of Mines is responsible, under the Mines andMinerals Act of 1976, for all mining operations in Zambia, which, so faras energy is concerned, includes coal mining at Maamba Colliery and oil

- 13 -

exploration. All mining operations in the country must be licensed, andthe mines are required to submit their annual operating programs anddetails of their financial performance to the Ministry. In earlieryears, the Ministry did not have a strong technical capability, but thishas been greatly improved by the recruitment of local mining engineersand other professional staff.

3.21 The Ministry gathers performance data on all mining operations,but data on the marketing and distribution of coal is still relativelypoor. The relationship between this Ministry and its client industry is,however, in marked contrast to the much weaker links between the MPTC andthe electricity undertakings. The former has clear licensing andregulatory functions, arising out of specific legislation, and thetechnical staff capable of carrying them out. In the case of the MPTC,the Electricity Acts are out of date and the MPTC has few technical staffand no clear regulatory authority.

3.22 The Forestry Department of the Ministry of Lands and NaturalResources is responsible for the management of all Zambia's woodlands andtimber resources, including research into their use. The Department,which is of long standing, has its headquarters at Ndola. Its opera-tional activities are undertaken by nine provincial forestry organiza-tions, which are responsible also for the licensing and management of thecharcoal trade. This decentralized organization fits in well with thethe Department of Energy's approach in the rural and household energysector, which emphasizes close involvement with local community organiza-tions. However, it has meant that, combined with staff shortages and thelack of good data on forest resources and production, the direction ofpolicy has not always been firm. The FAO/UNDP Wood Consumption andResource Survey will hopefully improve the information base and provide aclearer framework for policy.

The National Commission for Development Planning (NCDP)

3.23 The National Commission for Development Planning dates fromabout 1980 in its present form. The President of the Republic is itsChairman and the Prime Minister its Vice-Chairman. There is also aMinister of State who reports to the Minister of Finance. At theofficial level, the Commission has its owni Permanent Secretary and asenior Under Secretary. It has considerable political status and weight,although modifications to its last major planning exercise (the ThirdNational Development Plan 1980-84), contributed to its diminishedeffectiveness. NCDP is now seeking to re-establish its authority in theplanning field with the preparation of the Fourth National DevelopmentPlan (FNDP).

3.24 The general background and objectives of the FNDP are describedin an NCDP publication "Guidelines for the Formulation of the FNDP",which also sets out the organization and procedures to be followed in thepreparation of the Plan. General Committees have been established formacro-economic planning; financial resources; and inter-sectoral

- 14 -

linkages. They are supported by Sectoral Development PlanningCommittees, one of which deals with energy. It is intended that thesecommittees be put on a statutory basis and continue in existence A'.erthe preparation and launching of the Plan, to be responsible for itsimplementation and monitoring. It is also intended that the FNDP shouldbe supplemented by annual plans, timed to coincide with the annualBudget, which would proride a framework for regular updating andmonitoring of the planning process.

3.25 The Energy Sector Development Planning Committee is a new andextremely important element in the structure of the country's energyinstitutions. It provides a formal, inter-organizational framework foraddressing all aspects of energy development, planning and investment.The Permanent Secretary of the MPTC is chairman, and the Department ofEnergy and the Planning Commission provide a joint secretariat. Thereare two sub-Committees, one dealing with Commercial Energy and the otherwith the Rural and Household sub-sector. The Committee has twenty-fivemembers, drawn from all interested Ministries, the National EnergyCouncil, ZINCO and some of the energy corporations, the University ofZambia and private industry.

3.26 Although the energy chapter of the PNDP was not complete forreview by the mission, the broad outlines of its approach were fairlyclear from the first draft. The chapter reviews progress during theThird Plan period and forecasts the supply and demand for each fuel up to1990. The extent to which these forecasts reflect recent changes ininternational oil prices, the devaluation of the Kwacha and the likelyfuture trend of power exports to Zimbabwe is uncertain.

3.27 The proposed capital projects associated with these demandprojections are clearly set out. Several have been the subject ofdetailed consultants' studies, including the pipeline and refineryprojects in petroleum, and the Maamba Colliery rehabilitation in the caseof coal. In the electricity sub-sector, the project proposals are drawnfrom the Power System Master Plan prepared for ZESCO.

3.28 Where the draft Plan is weak is in establishing prioritiestreviewing inter-fuel linkages and appraising the economic and financialviability of proposed projects. This emphasizes the need for greatereconomic and technical expertise in the energy supply organizations, inZINCO and in the Department of Energy and/or NCDP. The lack of suchexpertise is a problem common to many public organizations, Ministriesand Departments in Zambia. It stems from a national shortage of skillsand the difficulty of attracting and retaining technically qualified andexperienced staff at the middle and senior professional levels inparastatal corporations and Government, due to their higher earningpotential in the private sector.

- 15 -

The Central Statistical Office (CSO)

3.29 The Central Statistical Office is a department of the NCDP, therole of which is defined in the Statistics Act (Cap 425 of the Laws ofZambia). It is responsible for the collection of all national statisticsand for the recruitment, career management and professional standards ofall statisticians employed in the Government. The CSO is headed by aDirector and three Assistart Directors who are responsible for nineDivisions, each headed by a Senior Statistician, which deal with NationalAccounts, External Trade and Payments, Population, Employment and othernational statistics. Sectoral work is handled by units within theindividual Ministries, such as Agriculture, Health, Education, Mines,etc. and a Statistical Services Unit coordinates central and departmentalstatistical activities. At present there is nio formal statistics unitwithin the Department of Energy, which is one reason why the developmentof energy data systems was a priority task when the Department and theNEC were set up. In addition to the central and departmental units,there is also a Census Administrator in charge of the Field SurveysDivision. This is responsible for census offices in the nine Administra-tive Provinces and is available to assist in surveys at the request ofthe CSO Divisions or other Government Departments.

The National Energy Council

3.30 As was noted above, the NEC was formally established in 1980 asa corporate statutory body with wide-ranging powers to undertakeanalytical and advisory work in the energy field. At the time, it wasthe only body with overall energy sector' responsibilities. It wasclearly intended that the NEC should occupy a central place in theformulation and monitoring of energy policy.

3.31 The Council consists of twelve members, nominated by theMinister (of Power). The present Chairman is a private businessman(formerly the Minister and Permanent Secretary of MPTC). The othermembers are the former Chairman (now a private businessman), with asimilar MPTC background, the Deans of Engineering and Natural Sciences ofthe University of Zambia, the Secretary General of the National Councilfor Scientific Research, the General Manager of ZESCO, the DeputyDirector of Posts and Telecommunications, the Chief Conservator ofForests, the Manager of Mining and Industrial Technical Services ofZambia Consolidated Copper Mines, and a Senior Economist from the NCDP.They are thus a mixture of private, Governmental and parastatalindividuals. Oddly, the MPTC and the Department of Energy are notrepresented, although they may attend Council meetings as observers.

3.32 The functions of the Council, as defined by law, are to advisethe Minister on energy policy, conservation and energy use, installationstandards for the supply of energy, energy legislation and energyprices. It is required to submit annual reports on the production,distribution, consumption and pricing of energy, to compile inventoriesof energy resources, prepare energy demand forecasts, undertake energy

- 16 -

research and development, and relate energy requirements to othernational needs and objectives (a full description of its functions iscontained in Annex 2).

3.33 Since 1980, the Council has met about three or four times ayear and has made a number of representations to the Government on energypolicy issues. It was not until 1984 that it had its own smallSecretariat, which consists of a Secretary, an economist and astatistician. The Secretariat has produced one statistical report andcollaborated with the Department of Energy and the University of Zambiain carrying out a national energy survey.

3.34 The Council recently set up two committees: one dealing withInvestment, Consultancies and Finance; the other with Research,Development and Demonstration. Up to the end of 1985, the first of thesehad held only one meeting. Significantly, in the course of it, aproposal was made to invite the Council to seek statutory powers to givedirectives in the energy sector, instead of acting as "mere advisers."The Committee on Research, Development and Demonstration has held severalmeetings and reviewed developments in biogas, windmills for waterpumping, solar energy and improvements in charcoal stoves. So far, itsdeliberations have not led to any firm proposals for dissemination of theexperimental energy projects being undertaken by various academic andother bodies in the country.

3.35 It is clear that the Council has been frustrated by the gulfbetween its comprehensive mandate and its lack of resources andoperational authority. These feelings have been compounded by theformation and growth of the Department of Energy (itself an NECinitiative), which derives operational authority and status from itsMinisterial base. Frictions between the two organizations emerged at anearly stage, but have been particularly acute in the past two years.Some have been due to poor coordination and lack of consultation betweentwo new and inexperienced bodies, each seeking to establish its identityin the same sector. But there is a more fundamental problem also. Apart-time representative body, such as the NEC, no matter how large itssecretariat and technical suppsrt, cannot assume the primary funct;ons ofGovernment in the formulation and implementation of energy policy. Norcan it assume the role of the energy supply organizations in identifyingand analyzing potential sector investments. Such a body can be advisoryand consultative, but no more than that. Hence the NEC, as constituted,can not effectively carry out the complex policy tasks for which it wasestablished.

ZINCO and the Public Energy Corporations

3.36 A large proportion of Zambia's commercial economy consists ofpublic corporations, which operate within the framework of the stateholding company ZIMCO. ZIMCO was set up in its present form in 1979,partly to regularize the relationship between the individual corporationsand partly to loosen the connection between the Ministries and the

- 17 -

corporations for which they had oversight responsibility. Its wholly orpartially-owned subsidiaries and associate companies in the energy sectorinclude:

Zambia Electricity Supply Corporation (ZESCO),Maamba Collieries,Tazama Pipelines,Indeni Petroleum Refinery Company,Agip (Zambia), andBP (Zambia)

The Zambia Forestry and Forest Products Corporation (ZAFFICO) is involvedin forestry and charcoal production. ZIMOIL is the ZIMCO agencyresponsible for oil procurement, in association with the Ministry ofFinance and the Bank of Zambia. Three international oil companies,Mobil, Caltex and Total, operate as independent distributors of petroleumproducts.

3.37 The managing Board of ZIMCO is chaired by the President, andits members drawn from Government, senior management and the tradeunions. The Government representatives are of Ministerial rank, andinclude the Ministers of Power and Mines, who thus have a watching briefover the energy ir-dustries. Its subsidiary corporations have their ownmanaging Boards on which Government Ministries are represented at asenior official level - normally by Permanent Secretaries. ZIMCO is abouy of considerable political and commercial weight, with a significantplanning and policy advisory ro'e as well Lis direct executive commercialfunctions.

3.38 ZIMCO is headed by a Director General, who is supported by fourExecutive Directors for Corporate Planning and Administration, Agricul-ture, Industry and Transport and Energy. There is also a FinancialDirectorate, with a staff of accountants. The Director of Transport andEnergy is responsible for oversight of ZIMCO activities in the energysector. He is assisted by one experienced technical adviser and a smalladministrative staff.

3.39 Strategic management of its subsidiaries is exercised by ZIMCOthough a formal system of corporate planning, which in principle consistsof a five-year plan, together with annual corporate budgets. Inpractice, the last five-year plan suffered the same fate as the ThirdNational Plan when the economy stagnated in the early 1980s. It wasrevised several times, but then effectively lapsed, although the annualplanning process has continued. Under the latter, ZIMCO issuesguidelines to the corporations in November of each year, setting out thegeneral economic background and the financial and physical objectives tobe pursued. In the following Ma:ch and April, the corporations'individual plans are submitted to ZIMCO for analysis, coordination andreconciliation in sectoral groups, and are then put before the ZIMCOBoard. After the plans have been approved, they are monitored by ZIMCOon a quarterly basis.

- 18 -

3.40 The corporate plans are potentially a valuable tool foridentifying and prioritizing investments and monitoring corporate andproject performance. The approach is comprehensive, in that it sets theactivities of the individual corporations within a framework of inter-national and national economic developments. It also provides an on-going system for review of the progress of the ZIMCO group as a whole.Each corporation sets out the assumptions on which its forward plans arebased, constraints which have to be overcome, financial targets, and data(past, current and projected) on expenditure, foreign exchange, manpower,productivity and various other performance indicators and ratios. Inaddition, the plans contain detailed company profiles, as well assectoral aggregations.

3.41 ZIMCO's corporate planning process is well conceived andconstructed. Such weaknesses as exist lie not with the concept, but inthe extent to which the required information is provided by eachoperating subsidiary, projects are subject to appropriate financial andeconomic anslysis, the subsidiary sectoral and overall group plans arereviewed for consistency and adherence to least-cost principles, and theresults monitored and followed-up. The diverse scale of the corporationsin the ZINCO group and the varying quality of their managementscomplicate these tasks. So too does the fact that the resources of theZIMCO organization, and of the Ministries responsible for monitoring itsplanning and operations, are limited and inexperienced in the applicationof planning techniques and in the essential follow-up and reappraisalwork. Some of these difficulties are of a practical nature, and can beovercome with greater experience and expanded management training.Others are endemic to a planning system that lacks analytical resourcesand within which the activities of the energy corporations are notclosely monitored.

- 19 -

IV. OPTIONS AND RICOMMENDATIONS FOR INSTITUTIONAL REFORM

Background

4.1 Chapter III described the organizations responsible for theenergy sector in Zambia. At the center is the MPTC and its Department ofEnergy, as well as the Ministry of Mines and the Forestry Department.There is a national advisory and consultative body in the National EnergyCouncil. There is the skeleton of a system of national and sectoralplanning in the apparatus for the preparation and implementation of theFourth National Development Plan. The major energy suppliers and largestenergy consumers are grouped under ZIMCO, which has a corporate planningprocess covering the investment and operational activities of the energysupply companies and some of their major customers.4.2 Despite this impressive array of organizations, two majorshortcomings are evident in Zambia's energy strategy and planning system:

(a) Coordination, prioritization and review of energy sectorinvestments and associated policy actions at the national levelis weak, largely because no single Government institution has aclear mandate or the skills needed to perform this strategicfunction; and

(b) Technical analysis of energy policy issues and investmentoptions is inadequate, primarily because ZIMCO and its energyproducing and consuming subsidiaries lack the necessarymanpower resources and technical skills.

In addition, there are less fundamental, but nevertheless seriousproblems of inadequate management communication within and betweeninstitutions and excessive pressure on a small number of senior officialsand managers, mirrored by shortage of qualified staff and lack ofresponsibility and activity further down the line.

Strengthening the Coordination of Energy Strategy and Investments

4.3 One option for addressing the need for more effective energystrategy coordination is to establish a separate Ministry of Energy,uniting all the Government's sub-sectoral energy activities within asingle organization. This has the merits of clarity and simplicity andthe potential for strengthening analysis of inter-fuel substitutionoptions and reducing inter-Ministerial conflicts of interest. The singleMinistry solution could be achieved by splitting the MPTC into two andcreating a separate Ministry of Transport and Communications. The PowerStream and the Department of Energy would form the nucleus of a newMinistry of Energy, which could acquire coal mining and petroleumexploration activities from the Ministry of Mines and the fuel aspects ofwood (including charcoal) from the Forestry Department.

- 20 -

4.4 Such a radical step has its attractions, but would undoubtedlycause great institutional upheaval and disruption to ongoing work. Inthe present difficult economic situation, and because there are otheroptions, it may not, on balance, be justified. Hence it is recommendedthat the existing Government structure be retained, but the optionreconsidered at an appropriate juncture, such as a broader re-shuffle ofministerial responsibilities.

4.5 Nevertheless, it is essential to clarify where responsibilitylies for the overall coordination of energy sector strategy and review ofinvestment plans. Based on the fact that its current mandate andcapabilities most closely match the requirements, it is recommended thatthe Department of Energy in the MPTC be given this responsibility. Tomake its mandate comprehensive, it is recommended that the Departmentalso be given direct policy responsibility for review of electricityinvestment and pricing and the downstream supply aspects of petroleum,coal and woodfuel. Until a Ministerial re-shuffle is contemplated, it isrecommended that responsibility for the production aspects of coal andwoodfuels and for petroleum exploration remain where it is at present.

4.6 The primary responsibilities of the Department of Energy wouldbe: (a) review of energy sector investment proposals in terms of theirconsistency with the national energy strategy and anticipated resourceavailability; (b) prioritization of potential investments in terms oftheir economic and financial viability and contribution to achievement ofthe sector strategic objectives; (c) analysis of energy prices in termsof their economic efficiency and the financial needs of energy suppliersand consumers; (d) evaluation of potential interfuel substitution optionsthat would reduce the economic cost of energy supply; (e) provision oftechnical advice on options for more efficient use of energy; and (f)production and analysis of forecasts and current data on energy supplyand demand. In matters affecting coal and woodfuel production policiesand petroleum exploration, decisions would be framed by the otherMinistries concerned, in consultation with the MPTC.

4.7 Should this recommendation be accepted, in order to clarify andmake explicit the resulting broader role of the MPTC, it is recommendedthat it should be renamed the Ministry of Energy, Transport andCommunications (METC). Recommended internal changes in the Ministry andthe Department of Energy to equip them to execute these expandedresponsibilities are discussed below.

Future of the National Energy Council

4.8 This recommended enhancement of the role of the Ministry raisesthe issue of the future of the National Energy Council. In its originalconception, the NEC was clearly intended to play a central part in theformulation of energy policy. For a number of reasons, it has beenunable to do this. Some of the reasons are temporary, kich as lack ofstaff, but others are more fundamental. Although it was set up bystatute, it is outside the Government and the policy making process. It

- 21 -

can advise and make representations, but it cannot implement policy, norcan it have access to all the information and considerations which mustbe taken into account in policy formulation. Its members are a mixtureof private businessmen, academics and Government and parastatalofficials. Despite the experience and abilities of its individualmembers, it has not, in the five years of its existence, succeeded inestablishing a true collective identity or having a significant impact onenergy policy or planning.

4.9 In addition to the limitations of its diverse membership andlack of executive authority, the Council also lacked an effective admini-strative and organizational link with Government initially. In proposingthe establishment of the Department of Energy to provide such a link, theCouncil in effect underlined its own isolation from the levers ofpower. For the Department to function effectively, it had to develop itsown energy data systems and direct involvement in the energy planningprocess. In so doing, it inevitably began progressively to take over thestated role of the Council. Because it was centrally placed within themachinery of Government, its authority in energy policy and planningissues soon became considerably greater.

4.10 In practice, and whatever the original intention, it is theDepartment of Energy which now has the authority, the information baseand the resources with which to begin the tasks of formulating andimplementing energy policies and strategy. In these circumstances, whatshould be the relationship of the NEC to the Government, and does itstill have a useful function to perform?

4.11 Views about the potential future role of the NEC are sharplydivided both inside and outside the Government. On one side it is arguedthat, while the NEC has clearly not made a significant impact on energypolicy, this is due primarily to lack of resources and to uncertainty asto its responsibilities. On the other side, critics claim the NEC hasprovided little or no useful advice to Government which could not havebeen given by its members individually; that it has been used as aplatform for special interests; that it has no collective identity; andthat it can never have genuine authority. It can not ovecome the firstthree weaknesses because of its diverse, part-time membership. It cannot overcome the fourth because it is outside the Government system. Onthis view, the NEC's role is that of the fifth wheel on the energycarriage. Between these extremes is the view that, if the Council's rolewas explicitly limited to that of an advisory and consultative body andits membership made more representative, it could have a useful role toplay as a 'think tank' and stimulus to Government policy makers.

4.12 The options with respect to the Council are therefore to:

(a) Retain the NEC as currently constituted, strengthen theanalytical capabilities of its Secretariat, clarify itsresponsibilities vis-a-vis those of MPTC and increase the

- 22 -

frequency of its meetings so it can play a more active role inenergy policy formulation and review; OR

(b) Disband the NEC and make the necessary arrangements to absorbits Secretariat into the Department of Energy; OR

(c) restructure the Council to give it a more broadly-based andrepresentative membership and make explicit that its role ispurely advisory and consultative. The Secretariat would remainat about its present size, and a regular process of formalconsultation should be set up between the Council Secretary andthe Director of the Department.

4.13 The major arguments against option (a) are that, (i) made up ofpart-time members and outside the system of Government, the NEC can notbe an effective policy-making body, even with an expanded secretariat andmore frequent meetings; (ii) its retention will perpetuate the confusionthat exists between its role and that of Government and the energy supplycorporations; and (iii) with an extreme scarcity of both skilled manpowerand financial resources, the NEC is a luxury which Zambia can illafford. The major argument against option (b) is that a potential"second opinion" on major energy policy issues would be lost to theGovernment and energy industries. However, there seem to be manyalternative channels, such as the Boards of ZIMCO and its subsidiariesand the Energy Committee of the Fourth National Development Plan, throughwhich such advice could be channelled. The major argument against option(c is that this function could be performed successfully by otherbodies, such as appropriate Committees of the Party, the Board ofGovernors of the University, etc., making the NEC dispensible. Onbalance, the mission leans towards option (b), although option (c) alsohas its merits. Option (a), retaining the NEC as presently constituted,seems a certain recipe for continued confusion ind duplication in energystrategy analysis and formulation.

4.14 Irrespective of which course of action is adopted, the work ofthe NEC's Research, Development and Demonstration Committee shouldcontinue. This has provided an important link between research andexperimental work on new energy techonologies, conducted by bodies suchas the University of Zambia, those responsible for energy policy, andthose potentially involved in the manufacture and marketing of moreefficient energy-using equipment. The work of the Committee needs tobecome more action and project oriented, and to have maximum impact, moreclosely integrated with the process of energy policy formulation. Forthese reasons, it is recommended that it report to the Department ofenergy, which would also provide its secretariat.

Internal Organization and Procedures of the MPTC

4.15 The Department of Energy has been established as a separateunit within the MPTC, independent of the 'Power Stream', and isphysically located away from the main Ministry building. These factors

- 23 -

have hampered the Ministry's internal communications on ener,y policyissues and hindered the integration of the Department into itsoperations. To overcome these weaknesses, it is recommended that theDepartment be brought into closer relationship with the MinistryHeadquarters by:

(a) Instituting regular and formal reporting meetings between thePermanent Secretary and the Director of the Department;

(b) Ensuring that the Department is represented at all Ministerialbriefings on energy policy matters and involved in preparationsfor all meetings of the Boards of energy organizations on whichthe Ministry is represented;

(c) Copying all relevant agendas, minutes, and other documents tothe Department and circulating the results of the Department'swork automatically to senior ministry officials;

(d) Upgrading the Department's accommodation.

4.16 Consideration should also be given to the possibility ofmerging the Ministry's Power Stream with the Department to form a newElectricity Section, responsible for all aspects of Government'srelations with the electricity industry. This would ensure that allrelevant adminis.rative, policy and economic issues are taken intoaccount in the planning and conduct of those relations. It might alsoprovide an opportunity for cost-effective economy in the use of scarcemanpower.

Internal Organization of the Department of Energy

4.17 In a fairly small organization such as the DOE, the allocationof work and of specialized responsibilities cannot be too rigid.Nevertheless, while flexibility needs to be maintained, a clearallocation of responsibilities is essential to achieve effectiveperformance. The following organizational changes are recommended toboth clarify section responsibilities and equip the Department of Energyto handle the broader and deeper functions proposed for it:

(a) Strengthening of the Planning and Administration Section, whichshould be responsible for the overall coordination of energysector strategy and policy; for the assessment of relativeenergy investment priorities; for review of energy pricingpolicy; for energy demand and supply monitoring and forecastingand for Departmental administration.

(b) Establishment of a new Electricity Section, possibly by mergingthe Power Stream into the Department. Following such a merger,the Section would be responsible for all electricity policyissues, relations with ZESCO and other electricity authorities,electricity legislation and regulation, and review of power

- 24 -

generation and transmission and distribution investmentproposals. Should the Power Stream remain separate, it wouldretain its current administrative and regulatoryresponsibilities for the industry and the Department'sElectricity Section should take responsibility for economic andfinancial review of power investment and pricing issues.

The other two existing Sections, dealing with Commercial Energy andConservatior. and Household and Rural Energy, should continue to exercisesubstantially the same responsibilities as they do at present. Shouldthese recommendations be adopted, the Department would be structured asin the following diagram:

Figure 4.1: RECOMMENDED STRUCTURE OF THE DEPARTMENT OF ENERGY

SENIOR MANAGEMENT

PLANNING ELECTRICITY COMMERCIAL ENERGY RURAL ANDAND SECT ION AND HOUSEHOLD

ADMINISTRATION CONSERVATION ENERGYSECTION SECTION SECTION

Role of ZIMCO

4.18 Two necessary conditions for the formulation and effectiveimplementation of an appropriate energy strategy in Zambia are that: (a)energy producers propose soundly-appraised investments and appropriatepricing policies that are consistent with the strategy and ensure thenation's demand for energy is satisfied at least cost; and (b) majorconsumers take cost-effective steps to manage their use of energy andreflect its economic cost in their operations and planning. Thestrategy-makers in turn need to be familiar with the current operationalperformance and future investment plans and objectives of theorganizations responsible for energy demand and supply. They also needto communicate the sector strategy to those organizations in a clear andeffective manner.

4.19 ZIMCO, the parastatal holding company, is in a pivotal positionto develop and review the appropriate investment and pricing policyproposals of the major energy suppliers and users. It is also therepository of key information on current and future commercial energydemand and supply. ZIMCO thus has a key role to play in all phases ofthe strategic energy planning and implementation process.

4.20 It is suggested that ZIMCO's role with respect to the tasks ofenergy strategy formulation and execution should include the following:

- 25 -

(a) Communication, to its constituent companies, of the Govern-ment' s macro-economic goals and energy sector strategy, as setout in the five year National Development Plan and AnnualBudget;

(b) Provision of guidance to the companies in the preparation oftheir performance targets and investment and pricing proposalsto ensure their consistency with the macro-economic environmentand strategic energy sector goals;

(c) Identification of potential interlinkages or overlaps betweenthe corporate plans of energy 1i;pjliers and consumers andbetter integration of those proposals, where appropriate;

(d) Consolidation of the energy sector investment proposals; reviewof their economic and financial justification; assessment oftheir relative priority; and their timely presentation toGovernment for review and incorporation of the agreed projectsinto the national energy sector strategy;

(e) Communication to the parastatal companies of the resultingdecisions with respect to their future performance targets andproposed investment projects;

(f) Monitoring of corporate actions and results, vis-a-vis theagreed program, and regular communication to Government ofcorporate and project performance.

4.21 As was recommended earlier, coordination of the ZIMCO corporateplanning system with the Government's annual budget and five yearplanning cycle is essential for the effective operation of theseprocesses. So too is timely reporting to Government, on the part ofZIMCO and its constituent companies, of current and prospective corporateperformance and future investment and operational plans.

4.22 To execute these tasks, ZIMCO will need to strengthen itsenergy economic and financial analysis capability, and, over time,develop that of its larger energy producing and consuming subsidiaries(ZESCO, ZCCM, Maamba Collieries, Indeni Refinery, Tazama Pipelines,etc.). The office of the Technical Adviser - Energy would be a logicalfocal point for this work. It would involve the preparation andcontinuous updating, based on input from the concerned ZIMCO subsid-iaries, of a rolling five year investment program, designed to meetZambia's forecast commercial energy needs at minimum cost. The programwould consist of an optimal mix of energy supply and demand investmentsthat took full account of internal and external resource constraints andopportunities for cost-effective inter-fuel substitution. Associatedpricing and other management actions, developed in consultation withZINCO's finance staff and the relevant subsidiaries, would be clearlyspelled out and continually monitored and updated.

- 26 -

V. WORK PROGCAMS OF THE ENERGY SECTOR INSTITUTIONS

The Need for an Energy Sector Strategy

5.1 The most pressing analytical task in the energy sector, in viewof the scarcity of investment resources and the importance for economicrecovery of ensuring a reliable supply of energy, minimizing imports andmaintaining export capacity, is to produce an internally consistent,resource-constrained strategy for the sector. Without this, the alreadyinadequate flow of external investment and technical assistance to thesector is likely to shrink further, forcing postponement of essentialconservation, maintenance, reinforcement and rehabilitation projects.

5.2 Despite the considerable effort that went into its preparation,the Energy Chapter of the 1986 Economic Review and Annual Plan did notpresent a least-cost sector investment strategy, as the document itselfexplicitly recognized 4/. The prospective projects proposed therein werenot all subjected to detailed economic appraisal 5/, nor was the issue ofthe least-cost mix of alternative fuels adequately addressed. Inconsequence, and reflecting the shortage of information and inadequateanalytical resources available in the energy sector, there is a pressingcase for Zambia to receive additional short-term technical assistance inthe preparation of an in-depth strategy for the energy sector. Thisassistance could build directly on the valuable work done in preparingthe Annual Plan and FNDP. A national team of experts could beestablished to collaborate in the ciercise, perhaps drawn from the EnergyCommittee responsible for preparing the Energy Chapter of the FNDP. Thiswould ensure that full use is made of existing knowledge and expertise.

5.3 Using the FNDP plan demand assumptions, supply projections andinvestment proposals as a starting point, the proposed strategy studyshould:

(a) develop detailed energy demand profiles for the main energyconsuming sectors -- mining, industry, agriculture, transport,commerce and households -- and forecasts of energy exports;

(b) estimate the economic costs of supply for each energy product,taking account of potential improvements in productiveefficiency;

4/ "The absence of a national energy plan complicates the investmentdecision-making in this sector...." Government of the Republic ofZambia, 1986 Economic Review and Annual Plan, Chapter XII-, Energy,para. 30.

5/ "The absence of economic and finiancial criteria with which this(rural electrification) exercise was conceived has made thisprogramme a burden to ZESCO..." Op.Cit. para. 24.

- 27 -

(c) identify the least-cost supply mix of different fuels, based ontheir economic cost of supply, that will satisfy the forecastdemand;

(d) specify and justify the investments, pricing decisions andother policy actions necessary to implement that least-costsupply strategy.

The end result would be a comprehensive, soundly-justified program ofleast-cost investments and related policy initiatives in the energysector. The Zambian authorities could present this program withconviction to international donors and proceed to implement itscomponents with their assistance. Preparation of the energy strategywould result not only in accelerated investment but also in considerableskill transfer to the Zambian organizations involved and a substantiveimprovement of the energy data base. This in turn would facilitatefuture energy sector analysis and investment program development andreview.

Energy Data Collection and Analysis

5.4 A second, longer-term priority is to build on the work done forthe FNDP and the proposed energy strategy exercise to improve systems forthe collection and analysis of basic energy sector data. On the energysupply side, there is already a basic framework of data on output andsales by the commercial energy industries. Improved information on thesupply and consumption of woodfuels will be generated by the FAO/UNDPWood Consumption and Resource Survey. But there are still many gaps onthe resource side, and in the information required for effectivemonitoring of the performance of the energy industries. This isparticularly true in the electricity industry, where the recent PowerSystem Master Plan 6/ drew attention to deficiencies in the operationalstatistics of the industry. In line with the Plan's recommendations,ZESCO will be establishing a comprehensive System Databook in the courseof 1986, which subsequently it plans to computerize. A similarsystematic data assembly exercise is required in the coal and petroleumsub-sectors. In addition, all the supply organizations need to review,in consultation with ZIMCO, the Department of Energy and the CSO, thequality and coverage of information on energy product sales.

5.5 In the areas of energy demand and utilization, the facts areeven less well-documented. Although the task of improving information isdifficult on the supply side, where there are a relatively small numberof organizations involved, it is immensely more so on the demand side,where there are several million industrial and household consumers using

6/ Power System Master Plan for Zambia, 1984 - 2004 prepared for theZambian Electricity Supply Corporation Ltd. by EKONO Oy, Helsinki,Finland.

- 28 -

a wide range of fuels in many different ways and with widely varyingefficiency. The situation is one where gaps caxi only be filledprogressively through a program of direct consumer surveys, industrialcensuses and improved analysis of sales data from the supply industries.

Recommended Work Program of the Department of Energy

5.6 Assuming the recommendation to make the Department of Energythe focal point for Government strategy and policy formulation in theenergy sector is accepted, the Department will need to broaden andstrengthen its existing activities. The following paragraphs suggestsome priority areas where such broadening and strengthening should occur.

5.7 The Planning and Administration Section, in addition toupdating the National Energy Balance, gathering energy price data andforecasting future energy demand and supply, should estimate price andincome elasticities for energy as a whole and the cross elasticitiesbetween individual fuels. This is an extremely difficult and complextask, surrounded by great uncertainty. However, since assumptions aboutelasticities have to be made if pricing policies are to be rationallybased, it is important that they should be explicit and founded on thebest possible empirical information and analysis.

5.8 A further task of the Planning Section should be to produce aregular, perhaps quarterly, statistical report on the energy situation,the first issue of which should appear during 1987. Particular attentionshoule be paid to the form and presentation of this report so that thepolicy and planning implications of its contents are clear andcomprehensible, not only to those within the energy sector, but also topoliticians and members of the general public. Ths use of derived,secondary and comparative statistics, the use of charts &nd diagrams, andthe careful choice of units of measurement will be important. (Forexample, the use of the Joule as an energy accounting unit, whiletechnically precise, is not easy for policy makers and the general publicto comprehend, especially in its multiples such as Gigajoules, Petajoulesand Terajoules. The use of physical equivalents, such as tonnes of oil,is normally much more relevant in the policy context).

5.9 The Planning Section should also prepare a program of energydata collection, in consultation with the other Sections and energyauthorities, to fill known data gaps and those identified by therecommended Energy Sector Strategy exercise. It should not attempt torepeat the overambitious and somewhat ill-prepared national energy surveyof 1984, but should concentrate instead on pilot and sample surveys withlimited and specific objectives - for example, small village or districtsurveys of fuel use, or the compilation of information emerging fromenergy audits in industry. Assistance from the CS0 should be sought,including the possibility of initially seconding an experiencedstatistician. It should also examine possibilities for collaborationwith the CSO's Field Survey facilities in energy survey activities.

- 29 -

5.10 At present, considerable effort is being put into mastery anddevelopment of the LEAP energy planning model. However, this model dealsprimarily with physical energy balances and is not used for economicanalysis of alternative energy investments -- perhaps the most criticalaspect of energy strategy development and certainly the most pressingneed in Zambia. This weakness, coupled with its absorption of scarcemanpower for data collection and processing, suggest that furtherdevelopment of the model might not be a top priority activity for theDepartment. To reach an informed decision on this issue, it isrecommended that the manpower requirements and capabilities of this modelfor performing the analyses most urgently needed in the energy sector bereviewed before further effort is devoted to its development.

5.11 The Household and Rural Energy Section should continue to movefrom its present emphasis on consultative procedures and institutionalcoordination towards a more substantive program of analytical work.Included in this work should be the evaluation of suburbanelectrification and other household energy options, including analysis ofhousehold energy consumption patterns, household appliance requirementsand comparative fuel-efficiency performance, and the economic and socialcosts and benefits that a program of household energy conservation andsubstitution might yield.

5.12 With respect to the Commercial Energy and Conservation Section,the aim should be to work towards tLe preparation of a comprehensivenational energy conservation program. A first survey of energyefficiency in the industrial sector has already been undertaken, and itis intended that work should now move into the areas of mining andtransport. By the end of this year, the Conservation Section should havecompleted its first review of energy utilization efficiency across themain energy consuming sectors and be in a position to define the majoropportunities and steps for conservation and more rational use of energyin national terms. The next stage will be to prepare a follow-up programof action, concentrating on key levers, such as pricing, technical adviceon conservation measures and preparation of conservation and substitutioninvestment projects in the most important and responsive consumingsectors.

5.13 The present Technical Assistance adviser in the ConservationSection will complete his initial tour oi duty by the end of 1986. Adecision will need to be taken beforehand on whether this support shouldcontinue. It should be noted that the present Adviser provides most ofthe Department's expertise in petroleum matters. Some technical exertisewill certainly be needed in this area, even if, in a year's time, theconservation work is capable of continuing under its own momentum. It istherefore recommended that the services of an adviser, wit'h experience inpetroleum fuels and energy management, be retained for a further periodof two years to continue the on-the-job training of national counterpartstaff.

- 30 -

5.14 Th.e proposed Electricity Section should be responsible foroversight of investment and pricing policy in the electricity industry.Should it be merged with the Power Stream, it would also acquireadministrative and regulatory responsibility for the industry. TheSection's primary responsibility should be to advise on the relativepriorities of ZESCO's proposed investments in power system rehabilitationand expansion and review the extent to which power prices reflect theeconomic cost of supply and provide ZESCO with the resources necessary tomeet its current and future financial obligations. To execute this roleeffectively, the Section will need to develop close working relationswith the responsible analysts in ZESCO and ZIMCO.

Review of Energy Legislation

5.15 One important issue which has a bearing on the effectiveness ofcentral Government institutions in the energy sector is the state of thecountry's energy-related legislation. The exploitation of agricultural,forestry and mineral resources, as well as the operations of the majorenergy industries, such as electricity, coal mining and petroleum, aregoverned by legislation in which the responsibilities of the Governmentand the various energy suppliers are defined.

5.16 Many of the laws are of very long standing; some even date backto the Colonial and Central African Federation periods, others to theearly years of national independence. There have been many changes incircumstances and institutions during that time, and many accompanyingamendments to the law. Hence it is now very difficult to gain a clearpicture of the legislative framework as it affects the energy institu-tions. In some cases, such as the legislation governing the role andresponsibilities of the NEC, experience has also Phown that the law, ascurrently codified, does not work well. There is now a strong case forundertaking a review and revision of energy-related law to bring it intoline with contemporary needs. It is recommended that the MPTC take thelead in initiating such a review, through the Legal Affairs Department,with a view to proposing an updated and consolidated revision of all thelaws relating to energy development, production, marketing and use.

Summary of the Recommended iork Program of the Department of Energy

5.17 A summary of the Department's recommended work program over thenext two to three years and a suggested time-frame for the various tasksis set out below. In addition to undertaking these tasks, the Departmentshould of course play a substantive role in preparation of therecommended national energy strategy.

- 31 -

Group Task Time Frame

Management

(a) Prepare a formal proposal for the future organiza- Shorttion of the Department, including a recommended Termstructure, proposed section responsibilities; anddetailed job descriptions for each recommendedstaff position;

(b) Develop a five-year manpower development and Mediumrecruitment program to achieve the desired level Termand qutlity of staffing; and

(c) Initiate a review and updating of existing Medium -legislation prescribing the role of Government in Longenergy sector regulation and supervision. Term

Planning and Administration

(a) Prepare a detailed energy balance for 1985, Shortshowing the sources and uses of all energy Termresources;

(b) Establish a database on current energy prices; ShortTerm

(c) Assess the adequacy of existing energy demand and Shortsupply statistics, identify major gaps and prepare Terma costed, prioritized program to close them;

(d) Estimate demand elasticities and cross elastici- Medium -ties for all major fuels in aggregate and by major Longuser group; and Term

(e) Prepare a proposal for and outline of a first Medium -Energy Report publication. Long

Term

Rural and Household Energy

(a) Analyze the implications for household energy Shortsupply and demand of the PAO/UNDP Wood Consumption Termand Resource Survey results and develop, withother concerned organizations, including theForestry Department and the charcoal industry, anappropriate program of follow-up action;

- 32 -

(b) Plan and execute a pilot analysis, in a selected Mediumsuburban area, of the costs and benefits of Termalternative household energy conservation andsubstitution initiatives, including use of moreefficient charcoal stoves, connection to the powergrid and the possible use of coal briquettes; and

(c) Outline a proposed dissemination strategy for Mediumimproved charcoal stove prototypes developed by Termthe University of Zambia.

Commercial Energy and Conservation

(a) Complete an initial economy-wide review of the Short -scope for cost-effective energy conservation and Mediumsubstitution, by fuel type and consuming sector, Termbased on current estimates of the financial andeconomic cost of alternative energy resources; and

(b) Outline a recommended nationwide energy demand Medium -management program, including justified invest- Longments, proposed price adjustments to reflect their Termeconomic cost of supply, and specification ofappropriate institutional tasks and responsibili-ties.

Electricity

(a) Review, in terms of their priority and consistency Short -with the national energy strategy, the power Mediumsystem reinforcement and rehabilitation Terminvestments and rural electrification projectsproposed by ZESCO over the 1986-90 period; and

(b) Estimate the economic costs and benefits of Medium -potential future extensions of ZFSCO's power Longtransmission system. Term

National Energy Council

5.18 Given the uncertainty about the future of the National EnergyCouncil, it is inappropriate to prescribe specific directions which itswork might follow, should it be retained. If it is decided to retain theNEC in an advisory capacity, its activities must move away from thosewhich duplicate or conflict with the Department of Energy (such as thecollection of statistics, pricing analysis, investment review and energymodelling) and into those which are not directly relevant to Governmentat this stage. These could include consideration of long-term strategicenergy objectives and representing the interests of energy consumers.

- 33 -

5.19 Irrespective of the Council's future, the work of its Research,Development and Demonstration Committee should certainly continue, notleast because it provides a valuable link with academic and scientificresearch organizations and with the private sector. To date, much of thework has been exploratory in character. It needs to become more actionand project-oriented, with particular emphasis on the dissemination ofnew technologies, such as improved charcoal stoves, and the establishmentof links between research and experimental work on the one hand andmanufacture and marketing by the private sector on the other. Ifsuccessful, it could provide a valuable input into the mainstream work ofthe Department of Energy, to which it should report.

ZIMCO and the Energy Supply Corporations

5.20 In the energy supply corporations, work programs should bedetermined primarily by comrmercial and market considerations. The ZIMCOcorporate planning process already provides a formal framework for theproposal, appraisal and aesessment of their investment and expenditureplans and the monitoring of individual projects and corporateperformance. Unfortunately, the energy supply subsidiaries lack adequatetechnical skill in project identification, appraisal, monitoring andreview. For the future, it will be important to strengthen thesecapabilities and to provide effective coordination between theCorporation's proposals and performance and ZIMCO's corporate planningsystem.

5.21 ZIMCO itself has a pivotal role to play in the analysis ofcapital expenditure priorities and strengthening the performance of itssubsidiaries in the energy sector. Based on energy demand informationprovided by Government and its constituent companies and guided by theNational Energy Strategy, ZINCO should be responsible for review andintegration of the investment proposals developed by the commercialenergy supply corporations. ZIMCO should also be responsible for settingfinancial and physical performance targets for the energy supply corpora-tions, for monitoring their performance against target and for initiatingcorrective action when performance deviates from target. Close interfacewill be necessary with Government, which, through the Department ofEnergy, should review ZIMCO's energy sector investment and performanceplans and incorporate the agreed program into the annual budget processand five year rolling national development plan.

- 34 -

VI. STAFFING, TRAINING AND TECHNICAL ASSISTANCE

Introduction

6.1 Almost without exception, the energy sector organizations haveidentified inadequate staff skills and resources as a major constraint tothe quality and quantity of their work. The problems are particularlyacute in the Government service, where it is difficult to establish newpositions and salaries are uncompetitive with those in the privatesector, and only marginally less so in the parastatal organizations. Theshortages are especially evident with respect to technical and managerialposts at the middle and senior levels.

6.2 Fortunately, it does not appear difficult for the Governmentand parastatal organizations to attract young graduates of goodquality. However, they can be difficult to retain after they have gainedexperience and further training. Once in the public sector, suchconsiderations as job satisfaction, status and a concern for publicservice can be important motivators, provided they are complemented byopportunities for varied work experience, training, exercise ofresponsibility and promotion. The identification of promising juniorstaff and the provision of appropriate training and job experience tofacilitate advancement at an early stage in their careero shouldtherefore be the major focus of manpower development efforts in theenergy sector.

6.3 In the case of technical and specialist staff, this may meanthat established promotion criteria, such as the length of service andformal academic qualifications, need to be more flexibly interpreted thanin the past. There is no doubt, for example, that given moreresponsibility, careful supervision and well-focussed training, some ofthe younger members of staff in the Department of Energy have thepotential to qualify for early promotion. This would allow theDepartment to meet a substantial proportion of its future manpower needsfrom its own resources and avoid a lengthy and perhaps futile search forexperienced candidates from outside.

Staffing Needs of the Department of Energy

6.4 The Department's most serious current staffing problem is thelack of experienced Zambian staff to review energy sector investmentproposals, analyse policy and propose an energy sector strategy. As aresult, the technical assistance advisers have been compelled to takemore operational, supervisory and management responsibility than isdesirable. Over the next two years, the Department urgently needs toappoint at least five middle-ranking and senior Zambian staff, four ofwhom would fill the Section Head positions, the fifth the position ofEnergy Statistician. Plans already exist for establishment of several ofthese positions. A more determined manpower development and recruitingeffort therefore needs to be pursued and possibilities of secondments and

- 35 -

transfers from other Ministries and agencies actively explored to ensurethat they are filled without unreasonable delay.

6.5 Another urgent need is to strengthen the economic capabilitiesof the Departmentts staff so they can deal more effectively with issuessuch as the economic and financial appraisal of energy investmentprojects, pricing analysis and estimation of fuel dehand and supplyelasticities. Economic analysis skills are required at both Section Headand junior staff levels. Should non-economist staff be recruited orpromoted to fill those positions, special emphasis should be placed onthe development of economic skills through training and structured workexperience.

6.6 In terms of specific positions, the most urgent requirement,which cannot be met from internal resources, is for the appointment of aDeputy Director. This position is required partly to bridge theconsiderable gap in seniority between the Director and the other nationalstaff. Much of the Director's work is also of a representational kind,involving liaison with senior policy makers and Ministers. This involvesconsiderable time away from the Department and leaves a management gapwhich currently is not filled. Appointment of an active Deputy, whocould bridge this gap and perform a direct supervisory and managerialrole in the Department on a day-to-day basis, is therefore a highpriority. Suggestcd terms of reference and qualifications for such aDeputy Director are set out in Annex 3. It may not be easy to find aperson who combines the necessary professional experience and technicalskills with a strong managerial flair, but, if the NEC were to bedisbanded, it is a post for which the Council's Secretary would be wellsuited.

6.7 A second important post which needs to be established andfilled in the Department is that of Head of the Planning and Administra-tion Section. The recruitment of a senior energy economist or energyplanner to head this section is a high priority. Proposed terms ofreference and qualifications are again set out in Annex 3.

6.8 A third post which needs to be filled urgently is that of Headof the proposed Electricity Section. This is a post of very considerableimportance, given the central position which electricity occupies in theZambian economy. It is evident that the Department currently lackstechnical and economic expertise in issues concerning the electricityindustry. This has diminished the Ministry's political influence on theindustry. It may be necessary to recruit externally for this post, butit is one of those for which intensive training in project analysis andthe electricity industry might make an internal candidate appropriate. Ajob description and suggested qualifications of the successful candidateare again outlined in Annex 3.

6.9 While the bulk of the Department's staff should be professionalengineers, economists and energy planners, a number of routine admini-strative tasks also have to be performed, such as budgeting, organizing

- 36 -

meetings, visits, etc. To avoid using scarce technical resources forthis work, the Department needs administrative suppo.t. For thispurpose, it is recommended that a middle ranking administrator (seniorexecutive officer or principal) be appointed.

6.10 Other appointments that should follow are the EnergyStatisticians Computer specialist, and the heads of the Commercial Energyand Conservation Section and the Household and Rural Energy Section.Secondment of an experienced statistician might be an appropriate way tofill the former position. With appropriate training and furtherexperience, internal candidates could be appropriate for the two otherpositions. A small complement junior staff will also be needed in eachsection. Over about a five year period, it is suggested that theVepartment should aim to develop the professional staff strength shown inFigure 6.1 below:

Figure 6.1: LONG-TERM STAFFING NEEDS OF THE DEPARTMENT OF ENERGY

DIRECTOR

DEPUTY DIRECTOR____________________ _____ I_

PLANNING ELECTRICITY COMMiERCIAL ENERGY RURAL ANDAND SECTION AND HOUSEHOLD

ADMINISTRATION CONSERVATION ENERGYSECTION SECTION SECTION

Sen. Economist/ Sen. Electrical Sen. Economist/ Sen. Economist/Planner Engineer Planner Planner

Statistician Economist/ Chemical RenewablePlanner Engineer Energy Specialist

Economist Electrical Mechanical Economist/Engineer Engineer Sociologist

AdminIstrator

PlannIng Asst

Energy Staffing Needs of ZIMCO and its Subsidiaries

6.11 As was recommended earlier, the primary responsibility foridentifying, justifying and supervising a least-cost program of invest-ments in the commercial energy sector should rest with ZIMCO and itsconstituent energy supply and consuming companies. Over time, both ZIMCOand its associated companies will need to develop small teams of skilled

- 37 -

engineers and economists fully capable of executing this task. ZIMCOalready has the nucleus of such a staff in the office of its TechnicalAdviser - Energy. This should be strengthened immediately by theappointment of a Senior Energy Economist, whose role it would be toassist the Technical Adviser in formulating ZIMCO's energy investmentprogram and monitoring its implementation. Additional staff should beadded to the section as the volume and complexity of the work grows andresources permit, but the section should remain small. Over time, smallcounterpart units with a mix of economic, engineering and finance skillsshould be developed in the larger energy supply corporations tostrengthen the quality of their project identification, appraisal andmonitoring activity.

Training of Energy Analysts

6.12 Training of professional staff in the Department of Energy hasbeen quite extensive in the past eighteen months. Almost all the Zambianstaff have attended seminars, workshops and other courses on variousaspects of energy analysis in Europe and elsewhere. A certain amount ofin-service and on-the-job training has also been provided by the fiveexpatriate advisers. However, overseas training is generally not a cost-effective solution and the in-house training has not been very systematicnor always directly related to specific working requirements.

6.13 In view of the shortage of qualified, senior technicalpersonnel in Zambia, the energy organizations must rely on developingtheir own internal staff resources to fill most of their more seniorpositions. This will require a considerable and well planned effort toassess the training and work experience needs of individual junior staffand to arrange for them to receive the necessary formal instruction andexposure to the workings of the energy industry and Government.

6.14 To organize continuous and systematic training needs assessmentand the provision of appropriate training and work experience opportu-nities for professional staff in the Government and ZIMCO, it isrecommended that a senior member of the Department's staff be formallydesignated the Energy Training Manager and explicitly given theseresponsibilities. This would be an appropriate major responsibility forthe proposed Deputy Director.

6.15 The Training Manager's task would have several dimensions.First, he or she would need to assess, in consultation with the Directorof Energy, other senior Government and ZIMCO officials, theirorganizations' long-term energy staffing needs. Second, he would have toassess the in-house staff resources currently available, if givensuitable training and work experience, to fill those future positions.Third, he would have to design an appropriate program of training andwork experience for each individual staff member, designed to help themmaximise their potential for career development. Fourth, he would haveto develop a program of external recruitment designed to fill theremaining gaps in the Organizations' staffing needs.

- 38 -

Establishment of an Energy Training Course

6.16 The critical skill shortage facing all the energy sectororganizations in Zambia is of staff with a good basic understanding ofthe technologies of energy production, transformation and use and thetechniques of economic and financial energy policy and projectanalysis. The specific skills and knowledge required include a practicalgrasp of energy demand forecasting methods; estimation of energy supplyand demand elasticities and their application; the concept of marginalcost, its estimation and use; the basic technical and marketcharacteristics of alternative forms of energy (power, coal, petroleum,woodfuels etc.); and techniques of investment project analysis (cashflow, shadow pricing, discounting, etc.) using micro computers.

6.17 Unfortunately, these skills, as applied to the practicalanalysis of issues and options in the energy sector, are not generallytaught to the required level in an undergraduate course in economics orengineering. Nor can they be fully assimilated from a one or two monthspecialist course in energy economics. A third alternative, that of aone year Master's Degree program, can be an effective means of acquiringthe necessary skills, but is an expensive option for both the student andsponsoring employer. There is however a fourth option - organization inZambia of a part-time energy training course, linked directly to theskill requirements of the energy sector organizations, that would teachyoung professionals these core skills over a period of a year or more.

6.18 The resources to teach such a course are already available inZambia. The expatriate energy advisers are a major potential teachingresource. The University of Zambia has highly qualified instructors ineconomics and engineering. Senior staff of ZIMCO, the energy supplycompanies and local consulting firms are knowledgeable on energy technol-ogies and investment analysis techniques. Experts visit regularly frommultilateral and bilateral development institutions.

6.19 Teaching materials are also available from a variety ofexisting sources. The World Bank's Economic Development Institute (EDI),for example, offers a seven week energy course for which comprehensiveinstruction material is available. An outline of the course, whichclosely parallels what is needed in Zambia, is attached at Annex 5. Aset of the course teaching materials can be sent to the Zambianauthorities for their review.

6.20 In view of the potential high cost and limited effectiveness ofalternative manpower development options, it is recommended that theUniversity of Zambia, with assistance from the Department of Energy,organize a part-time, post-graduate energy training course for juniorprofessional Government employees in the energy sector and staff of thepublic sector organizations responsible for energy supply. The courseshould be held for perhaps two hours per day, four days per week, so asnot to seriously disrupt ongoing work. Students should be required tocompleter case-work and reading assignments in addition to recei'iing

- 39 -

practical instruction. On completion, they could sit a brief examinationand be awarded an appropriate diploma by the University of Zambia.

Promotion Criteria

6.21 The other major difficulty hampering the advancement ofGovernment staff is that, in terms of formal academic training, mostjunior staff have only a first degree, whereas a second (Masters)qualification can be a requirement for promotion to senior professionalposts. Such a qualification is usually obtainable only by full-timestudy for a year or more, and is thus very costly - not least in the lossof staff time to the employer. In cases where the staff member's workexperience and technical skills are particularly strong, there is a goodcase for waiving this academic requirement. In others, it is a pricewhich the Department will have to pay if it is to develop sufficientsenior staff from within. Therefore, it is recommended that provision bemade, over the next two or three years, for one carefully selected memberof the staff to be seconded for such further education, with a view totheir early promotion on return.

Technical Assistance

6.22 Many of the Government and parastatal organizations alreadyreceive substantial technical assistance in the form of equipment andexpatriate advisers. In view of the current shortage of skilled Zambianstaff, the need for this will continue for at least the next 3-5 yearswhile local staff resources are developed. In addition, it isrecommended that a substantial program of short-term technical assistancebe provided to help the Zambian authorities prepare a well-justifiedleast-cost Energy Sector Strategy for the next critical five to tenyears.

6.23 It was suggested to the Mission by the NCDP that it too needsan Energy Adviser to assist in sectoral planning work. It was recalledthat, in the late 1970s, NCDP had such an adviser, but that the post hadsince lapsed. However, this was when there was no Department ofEnergy. For the future, it is probably better that, insofar as the NCDPrequires additional advice and expertise in energy planning, it should beprovided by the Department of Energy. The Department's staff shouldtherefore make a particular effort to strengthen working contacts withNCDP officials (and indeed those of other sector organizations), a taskwhich will be facilitated by the wc,rk of the joint secretariat which thetwo organizations provide for the Energy Sector Development Committee.

6.24 One specialist area of the Department of Energy's proposedfuture work which does call for additional technical assistance is thatof statistics. In view of the Department's current lack of statisticalexpertise, it is suggested that a short-term Statistics Adviser beappointed, for not more than six months, to review the coverage andquality of existing energy data and its presentation, to advise on surveymethodology, and to review the compatibility of Zambian energy statisticswith international practices and conventions.

- 40 -

Annex 1Page 1 of 2

LIST OF PERSONS CONSULTED

Ministry of Power, Transport and Communications

Mr. N. B. Nyoni Permanent SecretaryMr. F. D. Twmeo Depurty Permanent SecretaryMr. J. K. Chanda Principal, Power Stream (Former Secretary

of NEC).Mr. D. J. Mbewe Director, Department of EnergyMr. C. D. Konayuma Energy Conservation EngineerMr. S. Hibajane Engineer, Rural and Household EnergyMr. L. Chilembo Engineer, Rural and Household EnergyMr. W. Serenje Energy PlannerMs. P. Liswani Energy PlannerMs. E. Nawakwi EconomistMr. F. Musonda Technical AssistantMr. G. A. McKenzie Energy Adviser (DANIDA)Mr. K. Oksbjerg Energy Economist (DANIDA)Mr. P. Sondergaard Energy Planner (DANIDA)Mr. F. Hayes Fossil Fuels Adviser (U.K.)Mr. N. Lagoutte Renewable Adviser (France)

Ministry of Mines

Mr. M. Sweta Chief Mining EngineerMr. P. K. Varma Deputy Chief Mining Engineer

Ministry of Finance

Mr. F. Siame Financial Director

National Commission for Development Planning

Mr. B. J. Madubansi Sectoral Planning DepartmentMr. G. J. Chivunga Sectoral Planning DepartmentMr. G. C. Mudenda Sectoral Planning Department

National Energy Council

Mr. g. A. Kashita ChairmanDr. M. Macwani SecretaryProf. F. D. Yamba Member (Chairman R & D Sub-Committee)

- 41 -

Annex 1Page 2 of 2

Central Statistical Office

Mr. G. C. Sicilima Acting Director

ZESCO

Mr. N. S. Mwale Manager, Enginieering ServicesMr. R. Nyberg Chief EngineerMr. D. K. Kundu Senior Engineer

ZIMCO

Mr. P. J. Chisanga Director Energy & TransportMr. M. V. Muhsin Director of FinanceMr. M. Pethiyagoda Technical Adviser, Energy

Management Services Board

Mr. R. Mataka Director

Energy Systems Research Group

Mr. F. Ackerman Consultant, Boston, USA.

- 42 -Annex 2Page 1 of 2

EXTRACT FROM NATIONAL ENERGY COUNCIL ACT (No. 13 of 1980)

The Act provided for the establishment of a National Energy Council, andlaid down its composition, functions, powers and other related matters,as per the following extracts:

Composition of the Council

4. (1) The Council shall consist of the following members -

(a) the Chairman;

(b) two representatives of the University of Zambia who shall benominated by the Vice-Chancellor;

(c) two persons who shall have had experience in matters relatingto commerce and industry;

(d) two persons who shall have had experience in matters relatingto engineering and energy; and

(e) not more than five other persons.

(2) All members shall be appointed by the Minister.

Functions of the Council

7. The functions of the Council shall be to -

(a) advise the Minister on -

(i) energy policy;

(ii) matters relating to the conservation and use of energy;

(iii) environmental policy in relation to energy;

(iv) minimum standards to be prescribed with regard to thequality and reliability of supply of energy and associatedinstallations;

(v) any legislation affccting energy; and

(vi) the provision of adequate safety of employees.

(b) submit to the Minister such recommendations as it may deemnecessary to safeguard the interests of users of energy;

- 43 -Annex 2Page 2 of 2

(c) advise the Minister with regard to any scale of chargesproposed by any supplier or distributor of energy;

(d) at least once a yea-, compile and submit to the Ministerdetailed patterns of national production, distribution,consumption and pricing of energy;

(e) relate the energy requirements of Zambia to other nationalneeds, and advise the Minister as to the best methods ofmeeting the national energy requirements and of using anyshared resources;

(f) from time to time, compile inventories of energy resources,forecasts of trends of production, consumption and pricing ofenergy; and

(g) undertake, whether alone or in conjunction with others,research and development in the field of energy.

Powers of the Council

8. The powers of the Council shall be to -

(a) regulate the custody and use of its common seal;

(b) call for reports, data or information relating to energy or thedevelopment of any shared energy resource, from any person ororganization in Zambia;

(c) appoint suitable persons to investigate, or conduct a study of,and report on, any matter falling within the functions of theCouncil as it may, from time to time, deem necessary;

(d) authorize any person to enter into or execute any agreement ofcontract on behalf of the Council for the purpose of carryingout its functions;

(e) provide support for energy projects by way of grants or loans,the provision of accommodation or equipment, or by the commonor other use of equipment as it deems fit;

(f) do all such things as appear to it to be desirable or expedientin order to carry out its functions.

- 44 -Annex 3Page 1 of 3

NEN POSTS IN THE DEPARTMENT OF ENERGY

1. Three posts have been proposed in the Department of Energywhich are considered essential in the restructuring and strengthening ofthe Department recommended in Chapter 4. They are:

Deputy Director

Senior Economist/Planner (Head of Planning Section)

Senior Electrical Engineer (Head of Electricity Section)

The following paragraphs outline the suggested job descriptions, terms ofreference and qualifications for the three posts.

Deputy Director

2. The Deputy Director will support and assist the Director asrequired in all matters relating to the work and organization of theDepartment of Energy and will act for him in his absence. The Deputywill, in addition, be directly concerned with the day-to-day running ofthe Department, directing the work programs of the specialist sections,and supervising the work and career development of the staff. Whilesharing with the Director the tasks of advising Ministers and seniorofficials on energy matters, and developing and maintaining contacts withsenior managements and planners in other Ministries, the fuel industriesand other relevant bodies, the Deputy Director will be closely involvedin the regular and on-going duties of the Department and its staff. Heshould be a major source of new ideas and initiatives in the Department,and in consequence he will need to have a sound grasp of the energysector and the responsibilities of the Department, as well as goodorganizing ability and an understanding of the methods and techniques ofenergy analysis. He should be particularly concerned with the needs ofthe professional staff in matters affecting their career development,training and professional standards.

3. The Deputy Director will need to work closely with the Directorto ensure that energy covsiderations and interests are reflected in allrelevant activities of Government. He will need to be able tocommunicate these interests, as well as new ideas and policies which willoften have a high technological content, to other Ministries andorganizations in the energy sector at a high level.

4. It is unlikely that his original professional background andtraining will have been in energy studies, but could well be in thefields of engineering, applied science or economics, with workingexperience in Government or industry. Personal qualities of drive,management flair and flexibility in outlook would be importantrequirements.

- 45 -Annex 3Page 2 of 3

Senior Economist/Planner

5. The Senior Economist/Planner will be Head of the Planning andAdministration Section in the Department. He will be responsible to theDeputy Director and the Director for leading, supervising andcoordinating all the work of the section and for the delegation of workto the staff as required. The work of the Section is in two mainareas: Planning and Administration.

6. The Planning section's activities will include responsibilityfor the coordination of all energy planning activities in connection withthe preparation and implementation of the Fourth and any subsequentNational Plans, and Departmental reviews and analysis of the corporateplans of ZIMCO and the energy corporations. The Head of Section will beresponsible for economic and financial appraisal of investment programsand projects, and for the general monitoring of the overall energysituation in Zambia, as well as external issues and developments whichare likely to affect it. He will be expected to oversee the work of theenergy statistician in maintaining the Department's data and informationsystems and computer models and oversee the preparation of up-to-dateenergy balances and forecasts of energy supply and demand. In additionto undertaking and directing the analytical work associated with theseactivities, he will be responsible for ensuring that the results ofanalysis are presented in ways which are comprehensible and relevant topolicy makers. He will also be responsible, in all these activities, forliaison with economists and planners in other Ministries (especially theMinistry of Finance and NCDP) as well as with the energy corporations andacademic institutions.

7. The Administration Section's work will consist of ensuring thatthe internal organization and activities of the Department areefficiently run, that meetings are properly serviced and recorded, thatstaff matters are properly dealt with, and that the Department's budgetis prepared and expenditure is monitored and controlled in accordancewith the practices and needs of the Ministry.

8. The qualifications required for this post will be a Master'sdegree or equivalent in economics, applied science or engineering, and atleast five years relevant work experience in applied economics,preferably involving energy. The emphasis of much of the work will beeconomic, and the candidate should be capable of demonstratingconsiderable economic analysis expertise. Because of the need to directand initiate work in the energy field, the holder of the post will needto show evidence of drive, imagination and supervisory abilities. It isexpected that the holder of the post will, at least in the early stages,be assisted by an expatriate adviser.

Senior Electrical Engineer

9. A Senior Electrical Engineer will be required to head theproposed Electricity Section. The Section will be responsible for all

- 46 -

Annex 3Page 3 of 3

the energy aspects of the electricity industry. This will includemonitoring the performance and investment programs of the industry andfor such regulatory duties as are required by the country's electricitylegislation.

10. The successful candidate will need to work closely with, andhave the confidence of, the electricity authorities. This will requiretechnical understanding of the principles of electricity generation,transmission, distribution and use and the practical problems which theyinvolve. The post is not an exclusively technical one, but will alsohave considerable economic content in the appraisal and assessment ofalternative policy options. In this area, the holder of the post willneed to be able to work closely with other professionals in theDepartment.

11. At least in the early stages, and until the full regulatoryrole of the Ministry has been defined, the Electricity Section will besmall. For this reason, as well as for the constitutional relationshipbetween the Ministry and the electricity authorities, it will not be thejob of the Department to review daily the operational activities of theseauthorities, but rather to ensure that the Ministry has full knowledgeabout the industry's performance and problems. For this reason, theSenior Electrical Engineer will need an understanding of the datarelating to the industry's performance and efficiency in electricitygeneration and distribution.

12. In addition to academic qualifications as an electricalengineer, the holder of the post should have post-graduate professionalqualifications or relevant working experience of at least five years. Heshould show evidence of an interest in the practical and policy issuesinvolved in the electricity sub-sector and its place in energy policy andoverall economic development.

- 47 -Annex 4Page 1 of 2

THE LEAP MODELLING SYSTEM

1. In November 1985, the Department of Energy acquired thehardware and software associated with the LDC Energy AlternativesPlanning System model (LEAP). A short training program was held tointroduce its procedures and capabilities to the staff of the Departmentand the NEC. LEAP is a simple modelling system which was devised withthe special requirements of African countries in mind, taking account oftheir dependence on woodfuels and the importance of the rural sector. Itis a system of seven separate computer programs which can be usedindependently or together to assemble data and generate energyprojections.

2. The system starts with a Demand Model based on the currentconsumption of fuels (electricity, kerosene, fuel oil, charcoal, etc.) byfinal users in different sectors and sub-sectors (industry, agriculture,households, etc.). When aggregated, this produces total demandrequirements which can be projected forward according to variousspecified fixed or variable growth rates or changes in consumptionpatterns due to changing technology or other economic factors.

3. These final demands can then be turned into demands for primaryfuels (crude oil, hydropower, coal, wood, etc.) through theTransformation Model which contains the various conversion coefficientsrelev&nt to the processes of electricity generation, oil refining,charcoal production, etc. (i.e., how much crude oil is needed to produceX tonnes of final products such as gasoline, kerosene or fuel oil, or howmuch wood is needed to produce Y tonnes of charcoal).

4. From this requirement for primary fuels a Resource Modelcalculates the resource and land use implications of providing theprimary fuels. In the case of oil; this could be simply the imports ofcrude; for coal it could be local production or imports; or for wood itcould indicate (on the basis of input data about forest yields) theamount of land needed for given levels of production.

5. Each of these resource requirements can be costed on variousinput assumptions about prices and costs. Different scenarios andoptions can be compared in a Costing Progam which can include theeffects of variations in interest rates, foreign exchange needs, etc.

6. There are, in addition to these four sub-models, three MacroPrograms:

(a) A Demographic Program which can deal with the effect ofpopulation growth or the shift between rural and urban locationon energy and final fuel demand;

- 48 -Annex 4Page 2 of 2

(b) An Agriculture Program, which provides a representation of theagricultural sector and land use which can be used as inputs tothe Demand and Resource models.

tc) An Economic Program, designed to model and forecast nationaleconomic activity at the macro level such as GDP, imports,exports and income distribution for use as inputs into theother models.

7. The whole system, though seemingly elaborate, is basically avery simple series of arithmetical processes and is in no sense a dynamicor optimising model. It depends for its effective use as a planning toolon sound data relating to fuel consumption patterns and realistic inputassumptions about production functions and technical coefficients. Forexample, the whole system rests on the validity of the pattern of finalfuel consumption and on assumptions about the socio-economic factorswhich could cause it to change. As is well known, these are preciselythe areas of greatest uncertainty and weakest data in most developingcountries.

OUTLINE OF ECONOMIC DEVELOPMENT INSTITUTE

- w_ j IR A

Coe. Opq qg (1) N5'QI (3) A=Off= 1 (5) MIQUI 2 (6) MIA (8)

A Jgltc & E l Acts. GW/CWP Lid Use Fost Cearg Egy in bL & Tpt.A.-nti Maket ionm Food Pra}ctin PRoof_or__i & Potental for

k1 Feonmic of Laid Plamm C anSodalin Eff.

NArIL (2) MlMQIAL (4) D(IMD (7) DEMI) (9)= IEWLgm M1M5 1 1 2 1IATn; 1 F :C6TDIQ 3

aKdM of Society ogfsat Prod. Posiblity E&Ofc Projection F Factos affecting Hlloeld Enew

Pties ad Maretis Dapi.y Foecasts Urban ad RuralICuzrrS Flow

.INlAD (ID) ImD (12) BECNMIC (14) OlIC (15) EoIIIC (17)FaCWX&I 4 FCWXATDI 6 PFR SMM 2 PRINCiUBM 3 PRISCJIN 4

Na F4Ier? F8tsas/ Elasticity of Cadepts ofC0:zdal Eneg Policis affectin SuVply, Demid Margial Costs PricingB I equrs Demd Price A Coe Study

2DNAD (11) EColIC (13) EGIQMIC (16) HOW (18)IWCMr= 5 PRDiCPIE 1 PRIIBfl 4

Electric Poser Supply and Dmwud 6es ad* Awacy, Prifpl Chmr and FM law-TM Wals

Alternative Pmr0a Surpls Maginl Costs Ahn ntroductimiTecd _

.

Ia

: - l - - a

- - inw w m -

(19) (21) (23) (24) (26)U'PL SUE I SUFfi SIM 3 SUIPLY SIMX 5 SUPPLY SIM 6 SUPPl XS1 8Yof Paer Wood Fuels Cotbeiml and is and

and Mliiy4ro OIl d Go and Chrcoal. Uicga

3(2O) SUI.Y SIhE 4 (22) (25) (27)

SUFfIX SIM 2 SUPPLY SUE 7 G

IN CANI Pef mes PM Alcohol The Word BatcSolar Energy

(28) (30) (32) (33) (35)lCTRlC PGWEt 1 ThR&& lWUW I TR5ft W1G4 3 TRA6FCRAn1 4 TK 6 en

N Wood Milltg Wood Alcohol RI and PetrloPaer System and Iarvstg tral .os ProductsnlaM Petro-chentcals

4 _ _ _ _ _ _ _ _ _ _ .__ _ _ ___ _

(29) (q TRaFCrrIQ 5(34) (36)E1:rIC MOR 2 1RWC8WIQI 2 Electric Power TRAEFCIQN 7

Fuelwod ad lydro, Q,l 011, CEoalDI Total Syateu Qucoel P Gm, Gas Turbims, Cde, Ga, Synf l

Ahlysis aid Dieel, CablnedProbem la, Nuclew

00_ .IUD Fb

-~~~~ -

m .AT m - .- . - I I s,

(37) (39) (41) (42) (44)lIfR ORUMN 8 1 a:IC AAGIUSIS 2 EO((HI MLISBB 4 EOWNIC ALISIS 5 DW BAT 2Mind 7te Diacomt Rate Sbadm Pric£g Altenative

m Solar Ohu (Vpportty Tradeables d A Case StudyGeCtherml cot of Capltal Nxt4rraeables

S(38) (40) (43) (45)

ECIoQIC AIWBS 1 EMaIC AIA51S 3 HEW= UAI 1 U UlERM ea of The P_ Case AllINcII 1

IN Me Tile Vabje Project wbth Scearo An Introductimof Mmiy MethoW1 to the Program

(46) (48) (D)) (52) (54) ,CIPUIUR DOUHMJR 0M1UJR OMRUJER APL 8 CH"P mRm

M A1JCffIGI 2 Q IATL ri 4 AFPIICgrITM 6 IiPe Data Pare Report WIqT(ALhVut Daiud aput Rmm:.e Rim Bse Case Alteniave 2

Data (&pply) Data Program Rum Program Use of Cae terHamdao- Ivatnictim Hads-c Iiutructicx Hands-u instruction Hams-nm Irstructin and/or

6 .. Report Preparatim(47) (49) (51) (53) (55)

0209M aiM (XQUE APEL. 7 aCD=R APPL. 9 alP Partii ts OnlyNMRIQCrIG4 3 AWL1CXrIG 5 Input Data Inpt Data Prear Report

Di Iqxut Trawfor,mtl Ipat Cost Alternative 1 Alternative 3Data Data Rmun Pr Run ProrBwAsifr LuMtmeticm Hands-onIawta Hamb-in Instrxtfr Hnd W m Is,n ztrctimi

o

- 52 -

Pae4of 4

1B .~~~~~~~~.

,~H ______.

Hi

I _____ liii!_~~~ N13 13

ENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAM

Activities Completed

Date CompletedEnergy Assessment Status Report

Papua New Guinea July, 1983Mauritius October, 1983Sri Lanka January, 1984Malawi January, 1984Burundi February, 1984Bangladesh April, 1984Kenya May, 1984Rwanda May, 1984Zimbabwe August, 1984Uganda August, 1984Indonesia September, 1984Senegal October, 1984Sudan November, 1984Nepal January, 1985Zambia August, 1985Peru August, 1985Haiti August, 1985Paraguay September, 1985Morocco January, 1986Niger February, 1986

Project Formulation and Justification

Panama Power Loss Reduction Study June, 1983Zimbabwe Power Loss Reduction Study June, 1983Sri Lanka Power Loss Reduction Study July, 1983Malawi Technical Assistance to Improve

the Efficiency of FuelwoodUse in Tobacco Industry November, 1983

Kenya Power Loss Reduction Study March, 1984Sudan Power Loss Reduction Study June, 1984Seychelles Power Loss Reduction Study August, 1984The Gambia Solar Water Heating Retrofit Project February, 1985Bangladesh Power System Efficiency Study February, 1985The Gambia Solar Photovoltaic Applications March, 1985Senegal Industrial Energy Conservation June, 1985Burundi Improved Charcoal Cookstove Strategy September, 1985Thailand Rural Energy Issues and Options September, 1985Ethiopia Power Sector Efficiency Study October, 1985Burundi Peat Utilization Project November, 1985Botswana Pump Electrification Prefeasibility

Study January, 1986Uganda Energy Efficiency in Tobacco Curing

Industry February, 1986Indonesia Power Generation Efficiency Study February, 1986Uganda Puelwood/Forestry Feasibility Study March, 1986

Date Completed

Project Formulation and Justification (cont.)

Sri Lanka Industrial Energy Conservation-Feasibility Study March, 1986

Togo Wood Recovery in the Nangbeto Lake April, 1986Rwanda Improved Charcoal Cookstove Strategy August, 1986

Institutional and Policy Support

Sudan Management Assistance to theMinistry of Energy & Mining May, 1983

Burundi Petroleum Supply Management Study December, 1983Papua New Proposals for Strengthening theGuinea Department of Minerals and Energy October, 1984

Papua NewGuinea Power Tariff Study October, 1984

Costa Rica Recommended Tech. Asst. Projects November, 1984Uganda Institutional Strengthening in the

Energy Sector January, 1985Guinea- Recommended Technical AssistanceBissau Projects April, 1985Zimbabwe Power Sector Management April, 1985The Gambia Petroleum Supply Management Assistance April, 1985Burundi Presentation of Energy Projects for the

Fourth Five Year Plan May, 1985Liberia Recommended Technical Assistance Proj. June, 1985Burkina Technical Assistance Program March, 1986Senegal Assistance Given for Preparation of

Documents for Energy Sector Donors'Meeting April, 1986