Source: Extraordinary power challenges call for thinking outside the box | The Herald 11 DEC, 2019
Mapozo Saruchera Correspondent
There has been an avalanche of criticism directed towards the recently gazetted Statutory Instrument (SI) 249 of 2019, which compels exporters to pay their electricity bills in foreign currency so that power utility, ZESA, can augment power imports and national supply.
What is surprising about all this is that ordinary people and business have been complaining about the current load-shedding which was triggered by the country’s inability to generate enough electricity owing to shortage of water at its Kariba power station, meaning the only quick alternative is to import, hence the need for foreign currency.
A local weekly newspaper postulated that the above development would further undermine confidence in the Zimbabwean dollar without bothering to explain further.
Such a scenario would have been possible had SI 249 included everyone as people would stampede for foreign currency to buy power.
So, as long as ordinary citizens can still purchase electricity using the local unit, logic dictates that they will continue to have confidence in it.
Another argument was that paying for electricity in foreign currency would result in the cost of production rising thereby eroding locally manufactured goods’ competitiveness on regional and international markets.
Such an argument has proved to be blind to a number of issues. Firstly, the price of goods and services has actually gone down in United States dollar terms when compared to, say in 2018.
A good example being a fast food meal with two pieces of chicken and a portion of chips which once sold for around US$4 is now around US$2. By the same logic, exporters are likely to buy electricity at reduced rate today compared to last year.
Secondly, by paying for electricity in foreign currency, exporters are guaranteed uninterrupted supply of the commodity, leading to increased production, economies of scale as companies grow and reduction in the cost of production, hence giving local goods the competitive edge.
Others argued that the new foreign currency plan did not make sense arguing that some exporters’ local supplies were not allowed to charge their products and services in hard currency.
This argument only served to show that other people were against SI 249 owing to lack of understanding than the instrument itself being adverse.
Even without the instrument, exporters were still going to buy from local suppliers using local currency — so, how are local suppliers disadvantaged by SI 249?
Lastly, others contended that the gazetting of SI 249 of 2019 translated to policy inconsistence owing to the fact that Government had recently de-dollarised. Proponents of such an argument need to understand that extraordinary challenges demand thinking outside the box.
There is no conflict between the two polices as those who conduct business in local currency are not mandated to pay for electricity in foreign currency.
If anything, this group is poised to benefit as exporters turn into a readily available pool of foreign currency for the importation of electricity adequate enough to eradicate load-shedding.
To show that the above development is not peculiar to Zimbabwe, in October the Cuban government allowed its citizens to open bank accounts that receive dollars, yen, euros and other European currencies.
They are able to use the money to buy imported goods from new state-owned shops, where prices are charged in dollars.
However, most Cuban state workers receive their wages in national pesos.If one takes China for example, the Asian giant is giving the world’s largest economy, the United States of America, sleepless nights owing to the wealth it has amassed over the last few decades which has seen it contending for the top post.
China did not dollarise in order become wealthy — it produced; something Zimbabwe has to do. And for that to happen the country needs electricity which we have to import owing to our incapacitation to generate for the time being.