MUTAPA Investment Fund (MIF) has started rebundling ZESA Holdings to streamline operations, enhance efficiency and ultimately reduce costs within the electricity sector, an official has said.
For nearly two decades, ZESA (Zimbabwe Electricity Supply Authority) operated as a fragmented entity, a consequence of an unbundling exercise carried out around the turn of the millennium.
This saw the creation of five distinct subsidiaries — the Zimbabwe Power Company (ZPC), responsible for power generation; the Zimbabwe Electricity Transmission and Distribution Company (ZETDC), handling distribution; the Rural Electrification Agency, tasked with deploying rural electricity; and ZESA Enterprises (ZENT), which manufactures electrical equipment and components.
ZESA also owns Powertel, one of the internet service providers in the country.
The disintegration ultimately created inefficiencies across the electricity value chain, including multiple boards for the holding company and its subsidiaries, a costly bloated structure and heightened bureaucracy.
In 2019, Ernst & Young, having been contracted for consultancy by the Government, recommended rebundling of ZESA’s power assets to address the inefficiencies that were creeping in.
The recommendations remained unimplemented, until now.
The decision to revert to a consolidated structure comes as a direct response to persistent difficulties plaguing the power sector.
Another key recommendation of the Ernst & Young report emphasised the separation of the roles of chairman and chief executive officer.
This aligns with internationally recognised best practices in corporate governance matters, which advocate for distinct leadership functions to enhance accountability, reduce potential conflicts of interest and promote more effective oversight of management. Dr Sydney Gata holds the position of executive chairperson of ZESA Holdings, an arrangement the report implicitly suggests deviates from these contemporary governance standards.
The decision to revert to a consolidated structure comes as a direct response to persistent difficulties plaguing the power sector.
Another key recommendation of the Ernst & Young report emphasised the separation of the roles of chairman and chief executive officer.
This aligns with internationally recognised best practices in corporate governance matters, which advocate for distinct leadership functions to enhance accountability, reduce potential conflicts of interest and promote more effective oversight of management. Dr Sydney Gata holds the position of executive chairperson of ZESA Holdings, an arrangement the report implicitly suggests deviates from these contemporary governance standards.
“We have commenced the consolidation of ZESA, with a major focus on improving efficiency,” Mutapa Investment chief executive officer Dr John Mangudya said in an interview.
“The Government approved this consolidation about six years ago, based on recommendations from a consultant, so it is not a new thing.”
ZESA is one of several key State-owned enterprises that have been placed under the oversight of MIF.
The fund’s mandate includes driving reforms and ensuring these strategic national assets operate profitably and efficiently, contributing meaningfully to the Zimbabwean economy.
The rebundling initiative is a cornerstone of this broader agenda for ZESA.
Dr Mangudya acknowledged that implementing the structural change would be a protracted exercise.
A proper framework needs to be meticulously established to address numerous legacy issues.
These include managing the significant debts accumulated by the various subsidiaries, resolving claims from numerous creditors and addressing existing loan obligations.
The unbundling of ZESA, while perhaps well-intentioned at the time, clearly created more layers of bureaucracy and operational disconnect than it resolved, according to some economic analysts.
“Rebundling is not merely a cosmetic change; it’s a critical strategic move to re-establish a cohesive operational chain from generation to distribution, which is absolutely vital for improving efficiency and ensuring reliable power supply,” Mr Carlos Tadya, a Harare-based economist said.
“The multiple boards and fragmented decision-making have been a significant drain on resources.”
The bloated structure of ZESA post-unbundling, he said, directly contributed to increased operational costs and a less efficient allocation of capital.
“Consolidating these entities under one umbrella should, in theory, lead to significant cost savings through economies of scale, reduced overheads and more streamlined procurement processes,” he said.
“This rebundling is a necessary step towards making ZESA more financially sustainable and less reliant on Government bailouts.”
Another analyst, Mr Gerald Musara, noted the fragmented setup led to an unsustainable increase in the number of employees, meaning the costs of producing power per worker became disproportionately high, severely undermining the economic viability of the entire power utility.
“For far too long, the unbundled structure operated with inherent inefficiency, creating a sprawling bureaucracy where the cost of delivering power per employee became simply unsustainable,” he said.
“This was not just about too many employees; it was about a fragmented model that could not justify its overhead, hindering operational agility.
“This rebundling is a critical opportunity to right-size the workforce and, more importantly, optimise resource allocation for service delivery.”
