Gono overrules Nyambuya on power tariff hikes

Shakeman Mugari


RESERVE Bank of Zimbabwe (RBZ) governor Gideon Gono has overruled Energy minister Mike Nyambuya on Zesa’s proposed power tariff increases.

Nyambuya had proposed a tariff hike to cabinet last month but his request was thrown out afte

r Gono wrote a counter memo contradicting him.

This signals a widening rift between Gono and ministers, coming barely a week after this paper revealed his clash with Finance minister Herbert Murerwa over the RBZ’s quasi-fiscal activities.
 
In his memo to cabinet on February 9, Nyambuya proposed that Zesa be allowed to increase power tariffs by 560% with effect from today (March 31).

He wanted further hikes of 185% in June, 15% in September, and 10% in November to bring the cumulative rise for the year to 2 280%.
 
Nyambuya cited inflation, a weakening exchange rate and the cost of water and coal to justify his proposal. 
However, Gono immediately wrote a counter memo to cabinet and President Robert Mugabe attacking Nyambuya’s proposal.

In the memo, dated February 28, Gono blasted Zesa for making consumers pay for its inefficiency adding that Nyambuya’s proposal would hurt key sectors of the economy and consumers.
 
Instead he proposed that the tariff reviews be spread over the year at 95% per quarter. Cabinet has since adopted Gono’s proposal and is expected to announce the new tariff structure next week.

Gono said while Zesa whined about the exchange rate it had not repaid a “single penny on US$32,2 million (or $3,2 trillion)” it got from the RBZ for power imports and that the effective cost of the exchange rate had not materially affected Zesa’s actual local currency costs.


“Your Excellency, our analysis of Zesa’s profile of power generation has revealed glaring levels of capacity underutilisation, which in effect explains the high cost burden ratios warranting high charges being lumped on the consumer base,” wrote Gono.


He said consumers were paying for suffocating overheads caused by Zesa’s unbundling which duplicated roles.


Nyambuya’s memo cited overheads as the main cause of tariff increases.


However, Gono shot down the minister’s argument saying it was Zesa’s “superstructure” which
had seen it spending 65% of its revenue on salaries and wages. He suggested that the unbundling should be reversed to avoid “corporate incest” among the unbundled companies.


Irked by Gono’s remarks to cabinet, Nyambuya wrote another memo on March 2 defending his position but failed to convince his cabinet colleagues. In the memo, Nyambuya said Gono’s tariff structure would cripple Zesa and boomerang on consumers.


He said the US$32,2 million that Gono claimed Zesa owed to the RBZ was accounted for in its accounts as a loan but there were no terms of repayment.


He accused Gono of failing to deliver on his promise to give Zimbabwe Power Company US$3,5 million for spares and maintenance of Hwange Power Station.