14 February 2017

Zimbabwe: Power Tariff Increase - Zesa Has Other Options

Photo: This Day
(File photo).

Energy and Power Development Minister Dr Samuel Undenge dropped a bombshell when he told Senate recently that he was contemplating hiking power tariffs. Dr Undenge's proposal to hike electricity charges comes after the Zimbabwe Energy Regulatory Authority (ZERA) rejected a similar proposal from the Zimbabwe Electricity Transmission and Distribution Company (ZETDC). ZERA's argument for the rejection holds water, one of which is the need to complement Government efforts of reducing the cost of doing business.

Indeed, utilities such as electricity -- its cost and availability -- are some of the key factors that investors consider before investing in a country.

Zimbabwe is seriously in need of investment, thus ZESA must strive to make its products cheaper than those in the region so as to attract the much sought after investment. ZERA's rejection is informed by the consultations they undertook. The Confederation of Zimbabwe Industries (CZI), Chamber of Mines of Zimbabwe, Zimbabwe Farmers Union (ZFU), Commercial Farmers Union (CFU) and other business organisations argued that the increase of electricity tariffs would come at a huge cost to the economy. Agreed, but these organisations must also make sure they are unfailingly paying for the electricity they consume including settling their arrears.

The power utility company must not hike tariffs just to match the regional average of 14c/KWh, which seems to be one of its arguments. They must understand that the economies they are operating in are different. It is the current performance of the economy that also spurred ZERA to block the hike. While 14c/kWh might not have any bearing in a performing economy, it will definitely come at a huge cost to the Zimbabwean economy. Electricity is a key economic driver whose increase has ripple effects on the political and socio-economic lives of the people and industry.

The production of everything requires electricity, thus its increase will subsequently spur the increase of commodities and services. It's unfortunate that the manufacturers will pass on the burden to the final consumer, who is already grappling to make ends meet. The poor consumer is already struggling to meet other financial obligations. What if every utility and service provider hikes their tariffs and prices? It's unfortunate that the captive consumer has become a victim of managers who lack ingenuity and refuse to think outside the box. ZESA has many options that can be explored to raise the money needed to cover the import cost of 300 and 40 megawatts of electricity from South Africa and Mozambique respectively.

ZESA is owed over a billion dollars, which if recovered, can go a long way in funding various energy generation projects that were mulled years back, but have not yet kicked off. ZESA knows its debtors, so it must be brave enough to face them before burdening the already laden poor consumers.

These debtors must be placed on pre-paid meter system so that the debt can be recovered through their 50 percent debt recovery plan that the power utility put in place.

With this arrangement, ZESA will be assured of its dues since it will collect from the purchased electricity. In fact, every consumer must be put on prepaid system to assure 100 percent collection of revenue.

Unfortunately, the debt recovery plan is restricted to domestic consumers whose collective debt is a diminutive fraction of the billion dollar grand debt. The bigger chunk of the debt lies on the farms. Hopefully, Dr Undenge himself is clean on that.

He is on record saying there was no going back on tariff increases and he is determined to increase it as he says "there is nothing for free". He might have a point, but consumers still have mistrust in him after he directed ZESA's subsidiaries, Zimbabwe Power Company (ZPC) and ZETDC to engage Psychology Maziwisa and Oscar Pambuka's company for public relations campaign when ZESA has a full-fledged public relations unit. Such misplaced priorities force people to resist the hike.

Even the lifestyles of ZESA executives and employees are not commensurate with an entity that is extending a begging bowl to poor consumers. ZESA is one of the few companies that are still paying ridiculously high salaries. Someone on work-related attachment at ZESA is paid far more than a skilled civil servant.

Such profligacy be-gets mistrust in ZESA. The parastatal must adjust its wage bill in line with the macro-economic environment it is operating in.


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