Government will not increase electricity tariffs any time soon as it fears this will trigger another round of price hikes on the market, 263Chat Business has learnt.
Concerns around the current power tariff that has been eroded by inflation have become rife with analysts skeptical of the sustenance of the power utility company, the Zimbabwe Electricity Supply Authority (ZESA).
But for the government, it’s a potential negative ripple effect an increase on the tariff will have on prices in the market, that it’s worried about the most, as it is prepared to proffer ways to subsidize power so that tariffs remain at minimal levels for the consumer.
“The question about tariffs, that currently we are basically charging 2.5 cents per Kilowatt hour, is we are digging a hole and so forth. But I think you also agree with me that any ill- advised sharp increase in ZESA tariff rates combined with power outages that we are already facing will be most unwelcome, will certainly trigger another round of price increases and inflation,” Finance and Economic Development Minister Mthuli Ncube told a Parliamentary Portfolio Committee on Budget and Finance today.
“That is our feeling at the moment. While we are aware that at the current exchange rate in real dollar terms, the kilowatt rate has gone down to 2.5 cents, but also any sudden increase of rates to bring them to regional levels will unleash another round of inflation, and I don’t think we would want that so we must always move carefully in that regard,” added the Minister.
The Minister said, inflation in the country has been mainly driven by speculative behaviour particularly if one commodity increases prices, the entire market reacts.
ZESA subsidiary, ZETDC is charging consumers RTGS$ 0.0986 per kilowatt hour, a tariff which came into being back in 2011, making the country’s electricity rates the cheapest in the region yet it imports the commodity.
Converted to USD terms using the interbank market rate, the power parastatal is charging around US $ 0.025 per kilowatt hour against a regional average of over US $ 0.6 per kilowatt hour.
ZESA is however calling for a review to RTGS $ 0.15 per kilowatt hour to meet its costs of infrastructure maintenance and importation of power since local generation has greatly plummeted due to low levels at Kariba Dam.
Ncube said the Cabinet has already approved the re-bundling of the ZESA subsidiaries which has created five companies namely, Powertel Communications, Zimbabwe Electricity and Transmission Distribution Company, Zimbabwe Power Company, Zesa Enterprises and ZESA Holdings.
He said the development will help cut costs and bring efficiency to the company.
“We also asked ZESA to come up with a strategy to make sure the re-bundling exercise that as the Cabinet we have approved in terms of re-bundling it into one entity that needs to bear fruits we need to squeeze out the efficiencies so that we know these efficiencies can also translate to manageable rates. How do we know these demands for rate increases are not driven by simple inefficiencies within ZESA?” said Ncube.
However, analysts have called for a review of the tariffs in order to make ZESA self-sufficient in the wake of power shortages that have led to worsening black outs in the country.
Experts say the low tariffs in the country are the major reason for lack of investment in the energy industry by private sector owing to viability concerns.