via Editor’s Memo: Proposed electricty tariff hike disastrous – The Zimbabwe Independent January 22, 2016
THE proposal by the Zimbabwe Electricity Transmission and Distribution Company (ZETDC) to hike electricity tariffs by 49% is nothing short of outrageous and could be the death knell for industry in Zimbabwe which is already struggling from numerous bottlenecks.
ZETDC’s intention to increase power tariffs to such astronomical levels could not have come at a worse time with the country experiencing a disabling liquidity squeeze, low capacity utilisation of 34,3%, company closures and massive job losses. It also comes at a time the country already has the highest and least competitive tariff rates in the region as many consumers are struggling to pay their bills.
The planned increase will have devastating consequences for the country’s citizens of which 90% are not formally employed and are involved in menial jobs to eke out a living. Unemployment levels increased last year when a July 17 Supreme Court ruling, which allowed employers to dismiss workers on three months’ notice without paying a retrenchment package, resulted in an estimated 30 000 losing their jobs.
The tariffs hikes will further decimate the paltry incomes of civil servants whose salaries have already been cut to contribute to pensions. The absurd increase will also significantly push poverty levels in the country where most people live on less than a dollar a day.
The impact will be equally felt by business, particularly the mining sector, which is a major contributor to the country’s gross domestic product. The hike will further cripple the sector already hard hit by falling prices of most minerals and the downscaling of operations by a number of mining companies as viability challenges take their toll.
It will also have a negative impact on the manufacturing sector reeling from stiff competition from imports. It could also be the final straw for most companies that could result in more company closures to add to the 4 610 companies that closed shop between 2011 and 2014 resulting in the loss of 55 443 jobs.
It will be no different for the agriculture sector struggling from a long dry spell that could be a harbinger of one of the worst droughts the country has ever experienced. The hike could not be more inappropriate as farmers will need electricity for irrigation to mitigate food shortages.
The business community this week has also made their objections clear to the application to increase electricity tariffs.
“It was clear that every sector represented at the meeting cannot afford any tariff increase, and in fact, some of the companies belonging to these sectors are struggling to pay electricity tariffs at current levels as evidenced by the current US$1 billion owed to ZETDC by some consumers. We strongly oppose the application for tariff increase by ZETDC,” the Confederation of Zimbabwe Industries, Chamber of Mines of Zimbabwe, Commercial Farmers’ Union, Zimbabwe Farmers’ Union and the Zimbabwe Commercial Farmers’ Union said this week in a statement.
It is ironic that the planned increase is coming at a time government is seized with a 100-day plan to improve the Ease of Doing Business. That the hike will militate against the government’s efforts to improve competitiveness and productivity is a typical case of shooting oneself in the foot.
Availability and affordability of power are one of the key indicators investors look at when deciding where to invest and will surely balk at the tariff rate should ZETDC’s application be successful.
What makes it even more baffling is that government is fully aware of the impediment the high tariffs will have on investment as Policy Co-ordination minister in the President’s Office, Simon Khaya Moyo, said as much at a Zimbabwe Economic Review and Competitiveness Conference in October last year.
When all is said and done, the proposed electricity tariff hike will darken Zimbabwe’s prospects for growth even as it brings more light to the country.