September 15, 2016
Resuscitate the economy: Increase electricity tariffs
A ZESCO pylon in Lusaka
By David Kapoma
I wish to start by stating that the country has been on ‘standstill’ in the last few weeks due to the elections and the events that followed after. We now have five (5) years of President Edgar Lungu in control of our economy. Some of the challenges his government will continue facing include, but not limited to high unemployment levels, power deficit (load shedding), high inflation rates among others. Economists may have different views but in my view the most troubling issue is probably that of power deficit because this affects many sectors of the economy.
President Lungu
Earlier this year (2016) President Edgar Lungu instructed the ministry of energy to work closely with ZESCO in adjusting the electricity tariffs upwards as a way of making the tariffs cost reflective. He also mentioned at the same press conference when he made this directive that increasing the tariffs was going to attract investors in the energy sector. Unfortunately the president later changed his mind on the matter, a move I believe was made out of ‘political pressure’.
May I mention that the power deficit we are experiencing today was foreseen way back in the 1990’s according to several reports produced including the World Bank Zambia Economic Outlook report. The government at that time did not prioritise investing in the energy sector for some reason. Due to failure by the MMD to act accordingly when it mattered the most, we now have this massive load shedding of at least eight (8) hours per day and even more in some places. The sad news is that the load shedding may even increase should the PF government fail to take the necessary measures.
ZESCO’s continued load shedding programme is to mitigate the reduced power generation. However this has proven not to be effective as customers seem to be shifting the loads and simply postpone their consumption to the point when they get back power. This has led to an increase in the deficit of an average of about 260 MW according to the report“OPPORTUNITIES IN THE ENERGY
SECTOR IN ZAMBIA”
In dealing with the deficit government has in the recent past and currently importing 148 MW from AGGREKO off the coast of Mozambique; 150 MW from Southern African Power Pool (SAPP); and 100 MW from Electricidade de Moçambique E.P. (EDM) in Mozambique.
In bringing about sustainable power generation the government has proposed a number of measure which include commissioning of Maamba Coal Powered Station in November, 2015 generating about 150 MW; Promotion of Renewable Energy Technologies expected to produce a minimum of 100 MW; Contraction of Emergency Power from KAR-POWER starting on 1st January 2016 – 160MW; initiating the procurement process for the deployment of up to 300 MWfrom Solar; and up to 200 MW of inland thermal power stations (Diesel and Gas)
Zambia is currently faced with a deficit of 560 megawatts in its energy supply. Of the total installed Electricity Generation Capacity of Zambia of 2,347 MW, hydropower is the most important energy source in the country with 2,259 MW (96%), followed by diesel contributing about 4% to the national energy supply. Meaning that the country has not yet invested in other power generation ventures such as solar and green energy which is more sustainable.
The Zambia Development Agency (ZDA) recorded that the demand for electricity in the country has been growing at an average of about 3%, or between 150 and 200 MW, each year.
The biggest problem is that the government has no money to generate additional investment in the energy sector. More government borrowing for power projects will lead to greater indebtedness. The bigger issue however, is that electricity is the lifeblood of the economy and a solution has to be found. It is also common sense to argue that the power deficit is already creating a huge impact on business operations. If the status quo remains unchanged the mining companies are likely to be more affected going forward, a situation that may result in more job losses.
The other major sector already feeling the effect of load shedding is agriculture. The Poultry Association of Zambia (PAZ) expressed concerns that long hours of electricity load shedding and increased fuel prices has hindered development in the industry. Many poultry farmers are being forced to invest in alternative sources of power such as the use of generators at a time when cost of fuel has also increasing. This has further resulted in the increase of poultry products such as chicken meat.
The fact is electricity tariffs remain below cost recovery levels which reduces any incentive for long term investment in power generation. Zambia has one of the cheapest power tariffs in Africa.
Moving forward it is therefore prudent that the government considers increasing the tariffs in order to deal with the effects of load shedding such as loss of jobs, low industrial production etc. increasing tariffs may not be as brutal as many Zambians imagine. This would instil discipline in the manner we as end users use electricity. It will mean that no family will want to leave stoves, pressing irons, bulbs and other electrical appliances switched on when not in use. The government needs to increase the tariffs in order to attract private sector involvement. The truth is we have a power mess of our own making. The tariffs have to go up to cost reflective levels 2016 and beyond