ZIMBABWE’S industry has consistently used different platforms to lobby against what it calls uncompetitive utility tariffs on water and electricity with a view to get favourable reforms from government. ‘
Source: Power tariff freeze hailed – The Zimbabwe Independent July 30, 2016
Taurai Mangudhla/Fidelity Mhlanga
Different industry bodies such as the Zimbabwe National Chamber of Commerce, Chamber of Mines of Zimbabwe and the Confederation of Zimbabwe Industries (CZI) have argued the country’s tariff regime, coupled with power outages and high labour costs, rendered local industry less competitive to its regional counterparts.
In 2014, CZI president Charles Msipa called for a tariff freeze on grounds electricity costs were already too high and making manufacturing uncompetitive. Gold producers also said the cost of electricity should be reduced to avoid collapse of the energy intensive sector.
Against industry and public calls, the Zimbabwe Energy Transmission and Distribution Company (ZETDTC) proposed to increase tariffs by 49% in order to raise about US$1,2 billion for the company’s operations and power imports.
However, Zimbabwe Energy Regulatory Authority (Zera) chairperson Ester Khosa last week said her board had made a determination that the current tariff be retained, turning down the proposal which would see average tariffs at US 14,69c/kwh.
This comes at a time Zimbabwe Electricity Supply Authority (Zesa) is battling to recover over US$1 billion from its customers.
As a way forward, Khosa said Zera will be engaging an international consultant to examine the underlying cost structures of the utilities and recommend potential areas of cost savings and efficiency improvements to ensure sustainability given the cost of supply in the energy sector.
Khosa said the consumer groups in the mining, agricultural, commercial, industrial and domestic sectors were consulted through public hearings, individual written submissions including direct meetings and presentations to principals.
“In coming up with the decision to retain the current tariff the following parameters were considered: The performance of the economy in 2015 and 2016, the current efforts of government to improve the ease of doing business, the need to support government in reducing the cost of doing business, the need for utilities to improve efficiency levels, implement cost cutting measures and views and concerns from various stakeholders consulted during stakeholder meetings,” she said.
Highly-placed sources in Zera told businessdigest the regulator voted against the tariff hike despite pressure from the power utility company Zesa Holdings with a view to protect consumers.
“The feeling was that they should be creative even if it means doing what Econet Wireless did; that is to engage its suppliers and negotiate for lower charges in order to survive because piling pressure on the consumer is not the way to go,” said a Zera board member who requested not to be named.
Zera’s decision comes at a time Zesa has been dogged by scandals which has seen its power deals inflated by more than US$500 million.
Economist Prosper Chitambara said a 49% tariff hike at one go is too high and will cause huge viability problems for business.
“Industry and households cannot bear such a huge increase which could spell doom for the economy,” Chitambara said.
Another economist Tapiwa Mashakada welcomed Zera’s decision saying it could help save industry from total collapse.
“I think Zera is spot on for the time being and they have made consultations with stakeholders who feel that it’s not the correct thing to do in view of the harsh economic conditions,” said Mashakada, who is also former economic planning minister.
“In my view, the problem at hand is ZETDC’s debt, which needs to be cleared. Zesa must collect outstanding moneys and install prepaid meters,” he said, adding that “increasing the tariff does not solve the cash flow challenges for as long as consumers are not paying”.