25.60 %, Electricity hike- Too High for consumers to bare- CUTS-international

The newly approved electricity tariffs are too high to say the least. On Monday, ERB authorised Zesco to hike electricity tariffs by 25.60 %, despite the utility’s performance against the agreed Key Performance Indicator (KPI) being unsatisfactory.
Zesco in the recent months approached ERB proposing an upward tariff adjustment of 36% justifying this as a way of attracting investment and improving service delivery.
However, Consumer Unity and Trust Society (CUTS)-International is dismayed by this increase as 25.60% is very high and will have multiplier effects on the economy.

(CUTS)-International-Lusaka Acting Centre Coordinator, Patrick Chengo says, the tariff hike is not consumerate to consumer’s disposable income hence making the service more expensive and unaffordable to some consumers. “This is just at the backdrop of the fuel increments a few months ago. This hike will make the cost of doing business in Zambia high and might in the long run make the country struggle in achieving its economic diversification strategy,” he said.

“The cost of production among businesses will increase, and this will have adverse effects on pricing of many products. Therefore any hikes in electricity tariffs increases the cost base of any organisation or business and this mostly compels them to also start factoring their pricing structures. Given Zesco’s monopolistic position (state), its time the company came up with an effective internal tariff adjustment model that will support economic growth and development with consumer interests at the apex of all this, “ he added. “The tariff hike which is 3 times above inflation rate seems to build policy inconsistencies especially at the time when the country has been trying to develop and revamp the economy. Much effects arising from this will be felt by the house hold consumers who are already spending more than what they can afford on basic needs”.

Mr Chengo further has further urged the regulatory authority and Zesco to be considerate when structuring such kind of adjustments especially for energy as it is a key driver of any economic activity.

And CUTS-International, Executive Board Chairperson Ambassador Love Mtesa has stated that the purposeful and simultaneous increase on energy tariffs in the past seven months will have inflationary effects especially the single digit inflation that the country is boasting of today.

“the positive effects that have been seen from the fall in inflation from about ten percent to a single digit during the past few months will not be of any effect. It is like taking two steps forward and then suddenly five steps backwards. Already we have seen that cement which was falling and even started retailing at K52, 000 has suddenly risen to K55, 000 and it might even go up again,”he said.

Ambassador Mtesa has also expressed great reservations on whether Zesco will improve its service delivery even after being offered the 25.60 % tariff hike owing to the fact that every time the utility company is authorised by ERB to increase tariffs, there is less improvements in the service delivery. “This can be attested from the continued load shadings in most places across the country even after being authorised to hike tariffs last year. “CUTS would like to urge Zesco to also consider cutting personnel (staff) cost which are very high at 51%. This needs to be done immediately in order to make the utility efficient, “ he said.

Ambassador Mtesa has further urged Zesco not to only rely on tariffs to finance projects but the utility company should also consider generating money funds from alternative like the Lusaka Stock Exchange (LuSe). He said there are a number of companies that have greatly benefited from listing their companies on the stock markets and sighted Lafarge and Copperbelt Energy Corporation (CEC) as some them.

“Zesco should learn from the Copperbelt Energy Corporation (CEC) which has listed on the stock exchange. As of 2008 CEC raised about K 110 billion kwacha when it floated about 250 shares to the public, “he said.

“Currently, more funds are being contributed to the EIF Trust Fund and the Kingdom of Saudi Arabia on 3 February 2010, through its Saudi Fund for Development, contributed USD 3 million which totalled to just over USD 90 million of the overall funds. This should be an eye opener for Zambia,” he said.