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Botswana: The Effects of Electricity Tariff Hikes
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Mmegi/The Reporter (Gaborone)
7 April 2008
Posted to the web 7 April 2008
Wanetsha Mosinyi
The increase in electricity tariffs by Botswana Power Corporation (BP) last week is going to add to the burden that businesses are faced with like soaring inflation, rising fuel prices and high production costs.
BOCCIM public relations manager Tebogo Rapitsenyane said on Friday that sectors like mining and manufacturing have long complained of the high utility costs.
He said businesses are already operating under a difficult environment hence the increase is going to result in some struggling entities failing to keep afloat. "Nothing can however be done because we import about 70 percent of electricity but I hope we learn from this as a country that we should not rely on other countries for basic commodities," Rapitsenyane said.
High utility prices have been mooted as one of the reasons Foreign Direct Investment (FDI) has been slow in trickling into the country. Last Tuesday, BPC hiked electricity tariffs for domestic consumers by nine percent and businesses by 14 percent. In a statement, BPC said government has approved the increase because electricity has become a scarce and expensive resource.
Rapitsenyane said businesses will pass the cost of the hike to consumers who are already feeling the brunt of rising costs of basic commodities. "It is a sad story and an unfortunate thing because it ends up hitting hard on ordinary people," he said. The tariff increase is going to fuel inflation, which analysts said is heading to double digits.
Consumer Price Index (CPI) for February was at nine percent, up from 8.4 percent in January. Fuel prices, private school fees and private medical rates are the key drivers of the monthly increase, each recording changes of more than two percent.
Maungo Lebanna an analyst at Investec Asset Management Botswana said recently that compared to last year, food inflation continues to soar, reaching a record high of 18.4 percent since the 1990s. "We therefore expect inflation to rise to 9.5 percent in March, and given the persistent volatility in food prices, the likelihood of further fuel hikes, the recent 15 percent rise in civil servants' salary, and the increase in electricity tariffs, a double digit CPI number is possible in April," he said.
The increase is going to push inflation further outside the Bank of Botswana new target range of 4-6 percent. Lebanna said they do not anticipate CPI to return to the 4-6 percent target band this year.
Botswana's major power supplier, Eskom, recently proposed to the National Electricity Regulator of South Africa (Nersa) that it wants to raise its tariff by more than 50 percent.
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Any significant relief on electricity shortage in Botswana will only come after the completion of Morupule Power Station and Mmamabula energy project in 2010-2011.
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