ZESA declines chrome miners’ tariff proposal

Source: ZESA declines chrome miners’ tariff proposal | The Herald February 21, 2017

Golden Sibanda Senior Business Reporter
ZESA Holdings has rejected a proposal by chrome miners for a further reduction of the power tariff levied on the industry by between 40 and 55 percent citing high operating costs.

Consumers of electricity pay an average of 9,83 cents per kilowatt hour, but strategic economic agents may negotiate a lower tariff. Chrome miners currently pay a discounted rate of 6,7c per kWh.

Zim-Alloys managing director Munyaradzi Dube confirmed to The Herald Business that ZESA had declined the proposals for further tariff cuts.

“We had asked for (further) reduction because that is the tariff prevailing in South Africa (a major global producer),” Mr Dube said.

The Zim-Alloys MD said ZESA told the industry equivocally that it could not afford to supply the power at such grossly discounted tariff. Ferrochrome producing giants, Zim-Alloys and Zimasco, held more than 75 percent of the chrome ore rich ground in the country. Government has since reposed part of the unutilised ground.

Half the chrome sold on global markets is extracted in southern Africa. Other producers include Iran, Turkey, Kazakhstan and India.

Chrome mining and processing companies want ZESA to review the power tariff further down to between 3 cents and 4 cents per kilowatt hour.

“We are currently being charged 6,7c per kilowatt hour, which goes further down to 6c, on discount, if you pay in advance. But they have said they cannot give us (lower) tariff,” Mr Dube said.

An official at ZESA, who requested anonymity, confirmed that ZESA had indeed rejected the chrome miners request on the basis that while the price could come down, costs would remain high.

“The chrome miners wanted a commodity linked price. As such while we agree that the price of chrome is currently low on global markets, we could not lower the tariff further due to high costs.

“Already, at 6,7 cents per kilowatt hour, the miners are paying a subsidised tariff, which drops further down if one pays in advance. While the miners want a lower tariff when commodity prices fall on global markets, they do not ask for an increase when the prices recover,” the official said.

Zimbabwe, a major producer in southern Africa, earned $115 million from export of 140 000 tonnes of high carbon ferrochrome last year and $31 million after exporting 284 943t of raw chrome.

Zimbabwe’s platinum miners and ferrochrome producers recently reached an agreement with Zesa to prepay for power directly from regional suppliers amid foreign exchange shortages in the country.

ZESA currently imports power from the region to augment limited local production. The country produces just over 1 100 megawatts against demand for power at peak periods of 1 400MW. The Zimbabwe Energy Regulatory Authority (ZERA) last year shot down a proposal by Zesa Holdings to increase the power tariff by 49 percent. ZESA is on record saying costs far outweigh its revenues.

Government is in the process of reorganising the chrome mining sector by repossessing idle ground from large scale companies and parcelling it out to small miners to extract the mineral directly.

This comes as about 85 percent of the underutilised chrome rich ground held by large scale miners/ferro chrome producers was tribute. Efforts by Government to increase production come against indications on global markets that the price of chrome is picking up.