Power tariff hike insensitive 

Source: Power tariff hike insensitive – The Zimbabwe Independent

Editor’s Memo:Faith Zaba

POWER utility Zesa on Wednesday increased electricity tariffs by 50% with immediate effect. Hard-pressed Zimbabweans, who are surviving from hand to mouth, now have to brace themselves for a round of steep price increases across the board, including a hike in prices of services, goods and food. Sadly, employers cannot award salaries that can keep up with the expected price increases.

Already, many Zimbabweans can barely make ends meet. Most are struggling to put food on the table — with some families surviving on one meal a day. More than half of the country’s population is facing starvation after successive droughts.

The tariff hikes will not only further decimate individual incomes, but their impact will equally be felt by business, particularly the mining sector, which is a major contributor to the country’s GDP.

The 50% increase could be a death knell for industry in Zimbabwe, which is already reeling from numerous bottlenecks and making frantic efforts to survive in the face of the Covid-19 pandemic.

The increase will significantly push poverty levels in the country where most people live on less than a dollar a day.

In a statement this week, Zesa subsidiary, the Zimbabwe Electricity Transmision and Distribution Company (ZETDC) said the new tariffs were in line with regulatory approvals made last October.

“This is in accordance with the tariff award of October 2, 2019, which approved the implementation of monthly tariff indexation formula for changes above 10%,” ZETDC said in a statement.

“The rates are exclusive of the 6% Rural Electrification Levy and 14,5% VAT (value-added tax). In terms of Statutory Instrument (SI) 168 of 2012, electricity charges for domestic customers are zero-rated for VAT and in terms of SI 215 of 2005, — fixed charges on commercial and domestic electricity are zero-rated for VAT.”

While it is understandable that Zesa needs the additional funding to import electricity and pay its huge debt, the timing is just wrong. It is insensitive because of the myriad of challenges Zimbabweans are currently facing. Zimbabwe is importing power mainly from South Africa (300 megawatts) and Mozambique (400MW).

In addition to the food crisis, the country has suffered massive economic recession in 2019, which is continuing into 2021. Inflation has remained high and currently stands at just below 800% due to an unstable currency, cash shortages, expensive fuel and electricity, impact of drought, policy inconsistences and low confidence levels.

The economy is expected to remain in hyperinflation throughout the year. Policy formulation is particularly challenging given the combination of economic recession and hyperinflation.

The Covid-19 pandemic has worsened an already dire economic situation, resulting in company closures, job losses and companies barely breaking even.

The increase could not have come at a worse time with the country hard hit by low capacity utilisation which is projected to be as low as 27% this year. It also comes at a time when consumers are already struggling to pay their current bills. Zesa is owed millions of United States dollars worth of electricity as a result.

More than 95% of Zimbabwe’s population makes a living from the informal sector.

The Covid-19 pandemic has had a major impact on the informal sector. Life in Zimbabwe has been very difficult. People are worrying about day-to-day demands in a market where everything is very expensive, including rent now being charged in US dollars and food pegged at parallel market rates.

What is angering many Zimbabweans is that the tariff hikes have come when the power utility has been riddled with massive corruption scandals. Corruption has been bleeding parastatals in Zimbabwe.

While Zesa has been saddled with a huge debt, threatening to bring back load-shedding which lasted for up to 18 hours, the corruption levels have been alarming.

The parastatal needs to raise money to pay off the debt, but it cannot ask its clients to subsidise corruption. Zesa cannot continue to increase tariffs without dealing with corruption.