Southern Africa: SADC Cost-Reflective Energy Tariffs Target Unachievable

Southern African Development Community Member States are unlikely to meet the 31 December deadline for migrating to cost-reflective electricity tariffs due to challenges in raising local tariffs too fast in relations to consumer income and inflationary impacts.

SADC Energy Ministers adopted the principle of cost-reflective tariffs as far back as 2004 and that decision was reaffirmed in April 2007.

In 2008, meeting in Lusaka, Zambia, the SADC Council of Ministers approved the migration towards full cost recovery within five years, setting a deadline of 31 December 2013.

Although significant progress has been made by the Regional Electricity Regulators Association of Southern Africa (RERA) in developing scenarios to make tariffs more viable, most SADC countries are yet to fully adopt the recommendations as various issues still have to be considered, including affordability to low-income consumers.

"It is observable that no SADC Member State would comply with the SADC Council to reach full cost recovery tariffs by end of 2013," RERA Chairperson Phindile Baleni told a recent SADC Energy Thematic Group meeting held in Gaborone, Botswana.

Existing SADC energy tariffs do not provide sufficient profit for new investment and incentive for energy conservation, efficiency and substitution practices by consumers.

According to Baleni, only four SADC Member States have tariffs "that are able to provide the right signals for new investment and efficient use of electricity."

These are Madagascar, Seychelles, Swaziland and Zambia.

However, none of these countries are likely to attain cost-reflective tariffs before 2016 due to a number of factors, include the low-income population the region and the need for strategies that promote energy access and pro-poor tariffs.

A survey conducted by RERA with support from the Southern Africa Global Competitiveness Hub (USAID Trade Hub) in 2009 showed that the region's energy sector is not self-sustaining.

Electricity tariffs within the SADC region range from 2.7 US cents per kilowatt hour to 12.5 USc/kWh.

A delicate balancing act is needed to ensure that any new viable tariffs introduced do not exclude the vulnerable communities or industries in the region.

This calls for regional policies that allow for minimum level of supply while guaranteeing electrification support mechanisms for poorer communities and emerging businesses.

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