Increased Load Shedding Threatening Zambia’s Fiscal Outlook – CUTS

News Digger, September 5, 2019

Consumer Unity and Trust Society (CUTS) centre coordinator Chenai Mukumba says the reduction in electricity supply could worsen Zambia’s fiscal outlook.

Zesco recently announced an extension to the ongoing countrywide load-shedding due to its failure to generate sufficient power for all its consumers without stating the number of hours by which load-shedding would be extended.

But in a statement, Tuesday, Mukumba noted that reduced electricity supply would have severe effects on businesses and subsequently, end users of goods and services.

“Last week, Zesco released a statement informing its customers that commencing Tuesday, 3rd September, 2019, load management hours would be revised downwards to six hours due to the limitation in power generation caused by low water levels at our major hydro-power plants. Power generation is the backbone of the economy. In 2015, the economic losses due to load management were estimated at around 20% of GDP. As such, given the country’s economic situation today, this increased load management could further worsen the country’s fiscal outlook. Further to the macroeconomic impact, however, the reduced electricity supply will likely also have a severe negative effect on businesses and subsequently consumers who primarily purchase their goods and services from them,” Mukumba stated.

“With limited access to alternative energy sources, business productivity will likely see a decrease resulting in an increase in the cost of production. These costs are always ultimately passed on to consumers. It can therefore be expected that Zambian consumers will be the most negatively affected by this load management given that they are already currently facing an inflation rate of 9.3%. It is, therefore, important that urgent action be taken to deal with the persistent power deficit to prevent the adverse effects it will have on the Zambian economy.”

Meanwhile, Mukumba stated that it was imperative that the country’s energy mix be urgently diversified in order to avoid future power crises.

“Zambia is still heavily dependent on hydro-power accounting for about 85% of Zambia’s electricity sources. To do so, the government needs to deal with any barriers preventing the private sector’s investments in the country’s power sector. It is commendable that the amount of power generated by Independent Power Producers (IPP)s has increased in recent years as tariffs were made to be more cost reflective but more needs to be done to encourage more investments in the sector. Further to this, Zesco needs reforms to improve its efficiency. The government can consider unbundling the generation, transmission and distribution function of Zesco. This also includes completing and publishing of a full Cost of Service Study to ensure that consumers are paying for the true cost of producing electricity and not paying for inefficiencies within Zesco or subsiding private sector institutions such as the mines,” Mukumba stated.

“While Zesco has indeed called for increased energy efficiency more could be done to encourage energy efficiency across all sectors, especially energy intensive industries. The mines consume more than 50% of the country’s electricity and this sector could become more energy efficient to lessen on the amount of energy consumed in the country. Providing tax incentives to reduce the cost of importing energy efficient equipment could contribute to this outcome.”

Mukumba reiterated the need for Zesco to come up with a fixed schedule for load shedding to help people plan ahead for power cuts.

“As the country navigates this difficult period, in order to mitigate the negative impact of the in-creased load management it is imperative that Zesco adheres to the number of prescribed hours as well as the schedules it provides to the public. This is to ensure that businesses and citizens are able to organize their economic activities accordingly,” stated Mukumba.

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