25 November 2016

Zimbabwe: Mining Firms Push for Power Tariff Reduction

MINING companies have once again implored Government to reduce power tariff for the sector, particularly the gold mining industry, arguing the levy was not economic and too high compared to what obtains in other regions.Chamber of Mines of Zimbabwe chief executive Isaac Kwesu said gold mining companies pay 13 cents/kWh, a rate he said was way higher than what others pay.

Power utility Zesa Holding's average electricity charge stands at 9,83 cents/kWh, which has prevailed since the last tariff adjustment in 2012.

The Zimbabwe Energy Regulatory Authority declined Zesa's proposal to increase the power tariff by 49 percent in August this year, which would have seen the tariff jumping to 14,69 cents/kWh.

Zesa Holdings, which is owed about $1 billion in electricity bills by consumers, wanted a higher tariff to increase revenue to support its operations. The power utility has spent the last five years or so seeking an economic power tariff.

Mr Kwesu said the cost of energy weighed down on mining operations and should be brought into line with what domestic users, the manufacturing industry or the agricultural sector pay.

"When you prioritise your foreign exchange, you also have to prioritise your energy costs in terms of propping up those who generate the forex," he said.

Mr Kwesu said the cost of power for local mining firms is way above what other jurisdictions are levied.

Foreign exchange is the lifeblood of Zimbabwe's economy, which relies on a basket of currencies dominated by US dollar, after the country scrapped its unit in 2009 due to effect of high inflation.

The mining sector is also of strategic importance to Zimbabwe, as it accounts for over half of the country's foreign exchange inflows.

Mining accounts for nearly $2 billion of Zimbabwe's $3,5 billion annual export earnings, with gold raking in over half a billion dollars of that.

The mining sector generated $1,38 billion in the 9 months to September 2016 compared to $1,34 billion in the same period last year.

Besides the high cost of power, Zimbabwe faces an acute power deficit and relies on imports from the region to close its deficit.

Zimbabwe's electricity requirement stands at about 1 400 megawatts, at peak period of demand, but is able to generate an average of 1 000MW due to constrained generation capacity.

The cost of power is among a host of issues the Chamber of Mines said the Government needs to address in order to improve mineral production.

Other constraints included high royalty fees, high corporate tax, numerous charges from regulatory authorities such as EMA and rural councils.

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