More independent power producers needed
ZESA Holdings yesterday increased electricity tariffs by 50 percent, arguing the prevailing rate was too low — a move likely to trigger an adjustment in prices of goods and services.
This is coming at a time when President Emmerson Mnangagwa’s government is optimistic that the country will in the next five years be a net exporter of electricity as a result of several measures it is implementing, among them licensing of independent power producers.
The increase in tariffs, according to those in the know, is justified as electricity in the country is cheap compared to other sources of power.
Zesa, they argued, needs to service its equipment and to pay for power imports from the region.
Power supply is at the centre of gravity that holds the success of economic turnaround.
The centrality of power supply in economic recovery is as clear as day and it’s good news that Zesa and the government have adopted several initiatives to boost power generation, including bringing on board independent power producers.
Opening up the power sector is the only appropriate move and it’s good news that the government has embraced this approach.
The only downside to liberalisation is that it pushes up the cost of utilities and potential investors regard the current electricity tariff regime as too low.
Investment into power supply requires huge capital outlay and returns may be very slow in coming and this explains why state enterprises have monopolies in this sector.
However, given the country’s failure to meet internal power demand, the only way left is to fully open up the sector.
Unlike in cases where state enterprises have a monopoly and are the sole power suppliers, opening up the sector entails higher tariffs and business, farmers, manufacturers and miners should be prepared to pay the cost.
While there are persuasive arguments against the entry of private players in this sector, the track record of power suppliers in the developing world has not assisted this line of thinking, but instead prepared the consumers to pay dearly for available electricity than low tariffs for something that is non-existent.
For power users, the high cost could be a necessary evil as maintenance of the status quo would see the economy trapped in a web from which it may not be able to disentangle itself.
Consumers are likely to make a quick adjustment to any price variations as most are already relying on diesel and petrol as back-up.
Our government should open up more to new independent power producers as the first step towards sustainable economic recovery.