PLAYERS in the manufacturing industry are querying the rationale behind power utility, ZESA Holdings’ proposed tariff hike of nearly 49 percent.
Struggling to remain afloat, ZESA is proposing to increase the electricity tariff to US$0,14 per kilowatt hour from the current US$0,098.
The increase would put Zimbabwe at par with regional peers, ZESA argues.
For instance, Namibia charges US$0,14 per kilowatt hour; South Africa at US$0,13 per kilowatt hour; Zambia at US$0,10 per kilowatt hour and Botswana at US$0,09 per kilowatt hour.
Energy and Power Development Minister, Samuel Undenge, further argues that the proposed tariff hike is cost reflective and necessary to augment emergency power imports mainly from neighbouring South Africa and Mozambique.
Zimbabwe’s daily power demand stands at 2 200 megawatts and the loss-making parastatal is currently producing barely 50 percent of that need.
A worsening situation at Kariba power Station — the country’s main power source — affected by dwindling water supplies, threatens to make a bad situation even worse.
Industry executives canvassed by the Financial Gazette this week indicated that the tariff hike would sound the “death-knell” for an equally struggling manufacturing sector that is already operating at unsustainably low levels.
Bulawayo-headquartered National Blankets chief executive, Freedom Dube, said the looming power increase would have a very huge impact on industry’s operations.
“It’s a big jump, which we will have to contend with . . . It’s a disaster from where we are standing, as we are already struggling,” he said.
“What it means is that we do not have a way we can compete with imported products, so to add nearly 50 percent is to sound the death knell for manufacturing and this goes against the grain and talk in other quarters of government which is to reduce the cost of doing business,” said Dube.
Once a behemoth, National Blankets is operating at 30 percent capacity utilisation and has altogether stopped exports of its products.
Dube said the power crisis demanded for all stakeholders to meet and think outside of the box.
“Passing it (tariff increases) onto an already struggling consumer is not the best way to solve the issue. The government must come in as an enabler by creating an enabling environment. This thing must be viewed as a long-term issue and not short-term,” he said.
A Confederation of Zimbabwe Industries (CZI) report released last September placed factory utilisation in the manufacturing sector at 34 percent in 2015 down from 36 percent the previous year.
Many industries, which have only just opened for the New Year after the annual Christmas shutdown, have to compete with imports of cheaply manufactured goods.
Local producers, battling high overheads and load-shedding, will now have to grapple with the looming possibility of an increase in power costs.
Farmers organisations have already voiced their objection to the tariff hike, which they said would result in an increase in customer defaults.
Zimbabwe National Farmers Union executive director, Edward Tome said: “We are going to record higher consumer defaults, a development which will erode the utility’s credit rating. As it is, consumers are struggling with the current tariffs, so without any change in disposable incomes how will they afford the increase?”
The Chamber of Mines of Zimbabwe (CMZ), and CZI are also opposing the tariff increase.
In a joint statement CMZ and CZI indicated that the US$1 billion owed to ZESA was a signal that consumers, including the mining industry, were already struggling to pay the current rates
“At this stage, the economy of Zimbabwe cannot have cost increases in any of the inputs. We strongly oppose the application for tariff increase by the Zimbabwe Electricity Transmission Distribution Company. The US$1 billion debt is clear demonstration that consumers are unable to take a tariff increase. If anything, there is a need for a tariff reduction,” read part of the joint statement.
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