Tariff hike saves Zesa from sinking

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Sindiso Mhlophe



FINANCE minister Mthuli Ncube says the government recently approved a 100 percent electricity tariff hike to save Zesa Holdings from plunging into a financial crisis and to ensure continued power imports, the Daily News reports.

This comes as the country has lately been experiencing intermittent power cuts due to breakdowns at the creaky Hwange and Kariba power plants.

It also comes as one of Zimbabwe’s main sources of power, Eskom of South Africa, is experiencing major shortages of its own — to the consternation of both ordinary consumers and industries in the neighbouring country.

Speaking on Monday at a media engagement on the progress made on economic reforms under the Transitional Stabilisation Programme (TSP), Ncube said Zesa’s financial situation had significantly deteriorated owing to low tariffs.

“We would have a serious challenge with Zesa if we hadn’t allowed them to increase their tariffs for the viability of the institution. Certain suppliers could no longer be paid and the low tariffs were also impacting on the production of electricity.

“Things were just becoming unviable for the company,” Ncube said.

“Since the first quarter, there had been no tariff increases at all, but the exchange rate moved, inflation moved and other prices moved as well, not electricity tariffs.

“So, the institution was on the back foot financially and we allowed it to increase tariffs.”

The Zimbabwe Electricity Transmission and Distribution Company (ZETDC), a subsidiary of Zesa, first hiked the electricity tariff by 50 percent a fortnight ago.

Last week, ZETDC increased it by another 50 percent and is expected to do the same by month-end.

This comes as Zesa is angling for a viable tariff regime which it argues would enable it to pay for its power needs, without running the risk of being cut off by its suppliers.

Zesa has claimed that so low is the current tariff that “it was now cheaper to use electricity than firewood and liquid gas”.

The first 50 kilowatts of power shot up from $0,74 to $1,19 making it $59,50, while the subsequent 150 kilowatts will now cost $387, bringing the total cost of the first 200 KW to $446,50.

Deputy Energy minister Magna Mudyiwa recently told Parliament that Zesa Holdings now owed nearly US$90 million to Eskom and Hidroeléctrica de Cahora Bassa (HCB) of Mozambique.

“I am sure you are aware that we have often relied on imports from Eskom and from Cahora Bassa and EDM of Mozambique.

“Now the challenge that we were experiencing is that we are still getting the imports, but the Zimbabwe Electricity Transmission and Distribution Company have been failing to service their debts with EDM and HDB.

“We are trying to be up to date with Eskom as much as we can, but because of the low tariffs that we were having since March up to now, which were not cost reflective, the utility has accrued quite a huge debt, almost US$90 million that should be paid,” Mudyiwa said, while responding to a question from Harare East MP Tendai Biti.

In January this year, the government announced plans to clear its arrears with Mozambique and South Africa — after securing a US$100 million facility from Afreximbank and reviving a 30-year trilateral agreement with the two neighbouring countries as part of short-term solutions to stabilise local power supplies.

The tri-lateral agreement that was first signed in 1990 allows Zimbabwe to negotiate for “firm and competitively priced” electricity from Cahora Bassa and Eskom.

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