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Thursday, 28 July 2016 00:00

Is Abuja Disco Complying with NERC’s Regulation On Local Content?

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Power Minister, Babatunde FasholaWhat is missing in CEC’s strategy to take over Abuja Disco and sideline the Nigerian investors that invited them in the first place, is the failure to understand that Abuja Disco is a strategic national company, and Nigerians will loathe having this solely in foreign hand. The authorities know that if this happens, it will be complete licence for capital flight; something many believe is already happening, through transfer pricing, with the help of South African Chief Financial officer, Andrew Atterbury.


Following the privatisation exercise of the power industry in 2013, many would agree that the expectations of significant improvement in power delivery has not materialised. As a result of this poor performance, we are still a long way from the catalytic support role the sector could play in Nigeria’s economic development and prosperity. While some of the problems are external to the 18 combined generation and distribution companies, some of the blame could be traced to how some of these entities have been managed since the exercise.

One of such entities for which serious management problems are emerging is the Abuja Electricity Distribution Company (AEDC), acquired by the KANN consortium, a Joint Venture interest between Zambia’s Copper Belt Energy Corporation (CEC) and a local partner, Xerxes Global Ltd. The consortium has 60 percent interest, while the Federal Government retained 40 percent. However, it has emerged that there are serious operational and managerial breach of the laws of Nigeria and guidelines established by the Nigerian Electricity Regulatory Company (NERC).

The first of such breach is that the majority of the top management of the power firm are from South Africa and Zambia, representing CEC. The existing local content regulation by NERC states that no power company should have more than 5% of its management staff as foreigners. Abuja Disco has about 70%, including its CEO and Chief Financial Officer (CFO). This is a flagrant breach of this stipulation, and one can only hope that the authorities have not been compromised. Another point to be made is that, contrary to perhaps a widely held view, foreign managers do not sometimes translate to improved performance. This is especially the case when two critical ingredients are missing.

The first of those missing ingredients stems from the fact that those representing CEC on the board come from the experience provided by Copperbelt Energy, which supplies power to about 15 – 30 large customers in the copper mines in Zambia. The management therefore do not have the experience of managing a utility firm of the size of Abuja Disco, with millions of customers across the North Central States of Kogi, Niger, Nassarawa, Niger and the FCT. The lack of this experience is compounded by the absence of Nigeria’s local knowledge. We thus have a team that is blind to the inner workings and culture of Nigeria. I would have expected the series of engagement between the Abuja Disco and Nigeria’s regulatory authorities to put an end to such inadequacies and ensure that Nigerians that can do the jobs are hired for the purpose.

The importance of this local knowledge cannot be overemphasised, especially given the background of Abuja Disco as a former government owned parastatal with exotic history of corruption, inefficiency, and nepotism. It is important because, so far, it appears that the purposes for privatisation have not been realised in this case for the same reasons that the firm did not thrive under government management. What is required is the knowledge to drive the changes demanded by the necessity of privatisation.

If these matters are not enough to get the Nigerian authorities worried, then the possibility of complications that are emerging in the ownership of the Abuja Disco should. While the 60 percent shares sold to the KANN consortium is equally shared by Xerxes (Nigerian partners) and CEC (foreign partner), sources say CEC in various ways has been positioning itself as a majority shareholder of Abuja Disco, trying to circumvent their local partners who actually invited them in the first place. The motivation is obviously greed, following the realisation that Abuja Disco could provide a serious long term cash flow and an expansive balance sheet for their African aspirations. CEC had recently, and cynically, published in their financial statements referring to Abuja Disco as a subsidiary. That is essentially a fraud. And this should worry every Nigerian. One of the successes of the power sector privatisation was the fact that local investors played a big role. In the case of the KANN consortium, it was led by the Nigerian Chairman Ambassador Shehu Malami, Nigeria’s former ambassador to South Africa and a respected Elder Statesman.

While internal share disputes in companies should normally not be the interest of the average Nigerian, this is different. The complications here have the capacity to derail the careful medium term aspirations of the regulatory authorities and Nigeria in the power industry in a very sensitive Disco. Indeed, it has started to affect the performance of the firm in the delivery of power to Nigerians. The quick wins in operational improvements expected from Abuja Disco, given that it inherited the best infrastructure amongst all the Discos, has not materialised because the managers lack sufficient local knowledge and influence. This is made worse by them running this vast operation from the comfort of their offices in Abuja. Indeed, I learnt that in over two years since he became CEO, Neil Croucher, has never travelled outside Abuja.

CEC, not satisfied with the wrong insinuations that it owns Abuja Disco, has started to invite potential investors for the purpose of selling through an affiliate company. This effort is initially led by Mike Tarney, the MD of CEC Africa, now led by Siyanga Malumo, the CEC chairman in Nigeria. Sources have it on good authority that CEC has started to lobby Nigerian privatisation authorities, giving bribes in some cases, after the fraudulent filings for the joint venture with KANN they made at at CAC was discovered, for which reason Mike Tarney was recalled to Zambia. This is most ironic, talking to Nigerians with the aim of denying Nigerians their commonwealth. Worse still, these are been done with Abuja Disco funds, which they have control over.

What is missing in CEC’s strategy to take over Abuja Disco and sideline the Nigerian investors that invited them in the first place, is the failure to understand that Abuja Disco is a strategic national company, and Nigerians will loathe having this solely in foreign hand. The authorities know that if this happens, it will be complete licence for capital flight; something many believe is already happening, through transfer pricing, with the help of South African Chief Financial officer, Andrew Atterbury. If it was accepted before, this is no longer under President Buhari.

What we are seeing here is the repeated mistakes many foreigners make, sometimes aided by our own authorities – taking Nigerians for granted because of our regulatory and legal lapses. The genesis of the problems is allowing Abuja Disco more than the 5% foreign management quota, and this is time to correct the error, especially with the new NERC authorities assuming office about now. All the issues and problems can be traced to this singular error in the first place.

Because of that initial error, there is a complacency that everything goes in Nigeria. Inadvertently, it provides a basis for them to think they are superior to Nigerians. Some examples will suffice here. For an MD that refused to leave the comfort of his office in Abuja, could it be that he feels superior to socialise with Nigerians, thereby reinforcing the South African apartheid of race superiority? Other foreign top management executives display similar tendencies. The Executive Director Commercial services, Ernest Mupwaya (Zambian), who also doubles as Deputy MD, a former MD of Zambian Electricity Supply Company (ZESCO), and pencilled down for the role of CEO in the nearest future, is already demonstrating his tendencies by his weakness for ladies in short skirts in Abuja Disco. And further demonstrates his superiority complex by going around with a Nigerian bodyguard that carries his bag and also pushes his trolley for him at the shopping mall. Such a character should be withdrawn and sent back home by the corporate headquarters of CEC for the good of their investments and Abuja Disco in general.

Some of these issues may be personal, but they have serious implications for the focus of the management and for the operational delivery of Abuja Disco. Could this be related to why there are rising number of fatalities within the network due to electrocution and other related accidents, especially since the directors of technical and safety, who are both Zambians, also manage from the comfort of their offices in Abuja. Meanwhile, the succession plans agreed at the start of the private sector management of Abuja Disco, that will see Nigerians take over from these foreigners have been discarded, and the Nigerian director of human resources agitating for that sacked, with the help of the Nigerian Company Secretary Mrs Delano.

In concluding, my key findings and recommendation is that the issue of local content enforcement as regards the top management staff in Abuja Disco should be taken seriously by NERC and enforced accordingly. NCC has done a lot in this regard in the telecoms sector. NERC should do likewise in power. There is a high rate of unemployment in Nigeria and so questionable Zambians and South Africans should not come here to occupy jobs that can be filled by qualified Nigerians at home and abroad. The bill being proposed by the House of Reps and sponsored by Hon Femi Gbajabiamila is a step in the right direction. This bill, which will be passed soon, will ensure that foreigners are excluded from jobs that can be handled by Nigerians both at home and abroad. It will ensure that local content is backed by a national law. Hon Gbajabiamila should ensure that he uses Abuja Disco as a case study to support the speedy passage of his bill. This is best for CEC as credible Nigerians can better run this company due to superior local knowledge.




Credit: The Union.     28-07-2016

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