ENERGY and Power Development minister Simon Khaya Moyo has shot down a recent application by energy utility Zesa to increase electricity tariffs.
By Tinashe Kairiza
Moyo says increasing the cost of power would scuttle efforts to attract investment and grow the country’s fragile economy.
The Zimbabwe Energy Regulatory Authority (Zera) is currently reviewing an application by Zesa to increase tariffs to an estimated 15 US cents per kilowatt hour (kWh) from 9,86 US cents per (kWh.)
Zera last approved a power tariff increase in 2011 by 30% from 7,50 US cents.
The latest application by Zesa for a tariff increase has been fiercely opposed by the Confederation of Zimbabwe Industries (CZI), which argues that increasing power charges would derail efforts to grow the country’s manufacturing base.
Moyo told the Zimbabwe Independent last week that approving a tariff increase now was not “sustainable” and would also frustrate government’s efforts to lure investors.
Investment analysts have often cited the cost of power as one of the key determinants guiding where an investor sets up.
“I do not think that any power tariff increase at the moment is sustainable.
“We are building an economy and naturally you cannot push for an increase. At the moment I do not think it makes sense to push for an increase,” he said.
Zimbabwe’s power cost, currently pegged at close to US10c, is among the highest in Africa, with Zambia and Ethiopia charging 5 US cents per kWh and 6 US cents per kWh respectively.
Zera chief executive officer Gloria Magombo last week told businessdigest that Zesa’s application for a tariff increase was still under review.
“Zera has not approved or disapproved a tariff application.
“Zera has a process it follows to review tariff applications which includes consultations with key stakeholders and government,” she said.
In 2017, proposals by the loss-making Zesa to hike tariffs so it could “break even” were turned down.
Normally, Zera requires 45 days to evaluate an application for a tariff review.
Zimbabwe, which is battling to generate sufficient power, has been relying on imports, particularly from neighbouring South Africa and Mozambique, to meet its consumption needs.
However, in May last year, Eskom of South Africa threatened to switch off Zimbabwe from its power grid over US$43 million arrears for electricity imports.
The southern African country also owed Mozambique’s Hydro Cahora Bassa money running into millions of dollars in arrears for power imports.
Research think-tank BMI forecasts that Zimbabwe’s power deficit, which is set to be bridged through imports, will soar to 2,914tWh in the next two years.
By 2020, Zimbabwe is projected to import at least 2,508tWh while consumption will soar to 9,7000tWh.
Local power generation is however expected to increase this year, on the back of the completion of the Kariba South expansion project which is set to contribute an additional 300 megawatts to the national grid.
In the CZI 2017 Manufacturing Survey, the high power tariff was cited as one of the factors pushing up the cost of doing business in Zimbabwe.
The cost of power accounts for at least 5% of manufacturers’ cumulative production costs.