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Power tariff hike gives Zesa headstart

by Staff reporter
04 Aug 2019 at 10:06hrs | Views
Finance and Economic Development Minister Professor Mthuli Ncube last week announced an interim tariff framework meant to support Zesa's operations.

But will the new tariff(s) address the crippling power shortages?

In terms of the approved rates, the electricity tariff for non-exporting businesses will be increased from an average of ZWL9,86c/kWh to an average of 45c/kWh (approximately USc5/kWh). The electricity tariff for domestic consumers will be increased from an average of 9,86c/kWh to an average of 27c/kWh (approximately USc3/kWh).

The latter will be subsidised, the Finance Minister Ncube confirmed.

The electricity tariff for agriculture consumers will be increased from an average of 9,86c/kWh to an average of 27c/kWh (approximately USc3/kWh), which is also subsidised.

The tariff for ferrochrome smelters and other miners has been maintained at US$0,067/kWh and US$0,0986/kWh, respectively, and ensure that the resources are ring-fenced in a special account solely for purposes of importing electricity and Zesa be allowed to bill all other exporters and foreign-currency earners in foreign currency and ensure that the resources are ring-fenced in a special account solely for purposes of importing electricity.

The new tariff(s) may not be adequate because Zesa is on record indicating that it was seeking to have its US9,83 cents kilowatt hour converted to RTGS dollars at the interbank rate.

If it had been approved, customers would have had to pay at the interbank rate equivalent of the US dollar tariff approved in 2013.

But the proposed new tariff rates for domestic and agricultural customers translate to only  US3c per kWh, while that for non-exporting businesses translates to US5 c per kWh. So it's far short of what Zesa had requested. So will it help?

Zesa acting chief executive Engineer Patrick Chivaura said: "We take it as an interim review and half a loaf is better than nothing and will continue engaging our principles for a further improvement on the tariff to match the national power expenditure requirements."

It's a view other observers agree with.

Economic commentator Langton Mabhanga says a broader strategy is required to sustainably improve Zimbabwe's energy situation.

"Ring-fencing of exporters' forex tariff charges is plausible. But more modern energy resource mobilisation strategies could improve our energy sustainability situation," he said.

"Truth be told, even the new tariffs will only narrow the extent of subsidy on energy, but are still not enough to stave sustainability threats."


Meanwhile, a number of economic analysts have weighed in on the recent measures to stimulate the economy.

Economic analyst Dr Gift Mugano said upward review of the tax-free threshold of the 2 percent intermediated money transfer tax from $10 to $20 will have a positive impact on disposable incomes.

"The 2 percent tax levied on the $20 and above will have a huge positive impact on the Government in particular as it will help in the generation of more income and this will put more money in people's pockets.

"But on the negative side this is a disadvantage to the poor because foreign exchange rates have increased and this will still impact them negatively."

Mr Mabhanga said the Finance Minister rightly prioritised the critical sectors of mining and agriculture.

"The review and supplementary budget statement represent the transition of the economy from austerity to growth trajectory. The focus on agriculture and prospective injection of $3 billion represent the concrete steps to commence the 2019/2020 agricultural season and earnest commencement of preparations by Government," he said.

"The mining sector entails huge resources that have a potential of transforming the complexion of our economy and creation of a historical economic miracle, one sure legacy that President ED Mnangagwa is poised to deliver during the Second Republic.

"Leveraging our mineral and land resources will be critical in negotiating for our national stake and interests in all natural resource-based investments.

"Currently, minerals account for about 70 percent of total exports, most of these leaving the country in raw form. But beneficiation is still peripheral.

"Reaching $12 billion by 2023 will entail quadrupling current earnings hence more radical and ideological measures that place Zimbabwean interests at the fore will be critical and now."

Source - sundaymail