Joseph Madzimure and Cletus Mushanawani
Zesa Holdings’ automatic hike of 19,02 percent for all tariffs from Sunday is calculated from a formula that ensures continuation of imports and operation of its stations.
Without the formula, set in October last year when the regulator, the Zimbabwe Energy Regulatory Authority (ZERA), went through actual costs when setting the initial tariff, consumers would find themselves even longer in the dark each day.
In a statement yesterday, the acting managing director of Zesa’s distribution arm, Engineer Ralph Katsande, said the tariff adjustment was in accordance with the Tariff Award of October 2 last year, which approved the implementation of a monthly tariff indexation formula which takes into account the movement of macro-economic fundamentals such as the exchange rate and inflation.
However, consumer subsidies remain.
The larger subsidy is on the first 50 kilowatt hours each month, the cost of which rise from 41c/kWh to 49c/kWh. The new price means these first 50kWh now cost $24.50.
The next 150kWh rise in price from 91c a unit to $1,08 a unit, giving a total for a month for this band of $162.
The two subsidies are worked on the basis that a careful family can cope on 200kWh in a month and can survive on the basic 50kWh.
Buying the full 200kWh of subsidised electricity will now cost just under $198, including the 6 percent rural levy, up from the $167 of the last five months.
After the subsidy runs out, from 201kWh the tariff rises to $4,61c/kWh from $3,87c/kWh.
Zesa is relying largely on thermal power from Hwange and imports from South Africa and Mozambique.
Kariba South is generating well below capacity because of low water flows into Lake Kariba.
In Zesa’s energy mix, Kariba South power is normally the cheapest. Hwange power is more expensive because it needs to buy coal, and the cost of imported power is based on exchange rates.
Eskom, the South African utility, has announced it needs large tariff rises as the tariffs it has been charging are the main cause of the lack of maintenance and expansion of the South African system.
It was the same problem facing Zesa that gave rise to tariff rises in October last year.
But Zesa is also under orders to slash administrative costs by uniting the five companies into which it was split into a single entity and to upgrade its management.
Government wants to get as much power as possible to ensure uninterrupted power supplies, particularly to the manufacturing, mining and agriculture sectors.
Farmers want stable electricity supplies at this point to irrigate their crops.
Zimbabwe Farmers’ Union president, Mr Wonder Chabikwa, said the electricity tariff increase would need a further review of producer prices for crops produced under irrigation.
“I hope Government will consider further reviewing the producer price of our crops to meet production costs for farming to remain profitable. If we don’t get an increase on producer price, farmers will be operating at a loss. They need to recover their production costs, electricity included,” said Mr Chabikwa.
His comments come on the back of Government’s Wednesday announcement of a review of the maize producer price from $4 000 to $6 958 per tonne.
Confederation of Zimbabwe Industries (CZI) past-president Mr Sifelani Jabangwe said the electricity tariff increase should be in line with inflation.
“If the tariff hike is above inflation, it will erode production levels. We do not want a situation whereby industry will not afford to access power due to high costs,” he said.
The formula used has produced an increase below inflation, largely because the interbank exchange rate has been drifting down more slowly than inflation.
Zimbabwe National Chamber of Commerce (ZNCC) chief executive officer, Mr Christopher Mugaga, said the increment was long-overdue considering the sub-optimal charges ZESA was charging.
“We all know the energy challenges haunting us as the private sector. ZESA is undercapitalised and given this fact, the only way for them to get out of this hole is to charge the right price.
“The 19,2 percent increment is way below the monthly inflation figures. As business, we should be honest to each other and desist from the blame game because consultations or no consultations, the tariffs had to go up. We are always in touch with ZESA and ZERA and we know the prevailing situation in the energy sector,” said Mr Mugaga.
Consumers are, as always, worried and for some on fixed incomes it may well mean learning to live with less electricity each month.
A consumer, Ms Stella Jongwe, pointed out that along with other price rises, the new Zesa tariff did require employers to review salaries.
“While we appreciate that things are going up everyday, but having another tariff hike will affect us. We are grappling with the increase of bread and other basic commodities. Our employers should also come on board and review our salaries accordingly. They are no longer sufficient to take us through the whole month,” she said.