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Industry rejects ZESA tariff hike

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Industry has rejected ZESA’s proposal for an unprecedented electricity tariff hike in United States dollars saying it would create a miserable situation for companies already battling to remain afloat.

Business Times can report that ZESA proposed to review upwards its electricity tariff to US$0.1221 per kilowatt hour (kWh) from the current US$0.0981 per kWh for electricity to be available.

The proposal was tabled last week in a crisis meeting with industry representative bodies including the Confederation of Zimbabwe Industries (CZI), the Zimbabwe National Chamber of Commerce (ZNCC) and Chamber of Mines of Zimbabwe.

ZESA told captains of industry that it will give preferential treatment to businesses that are willing to pay US$0.1221/kWh.

But, captains of the industry argued that most manufacturing companies have no capacity to pay the reviewed US$ tariff as they are dependent upon the Reserve Bank of Zimbabwe’s foreign currency system to access forex.

“Industry does not have capacity to pay such a tariff,” CZI president, Kurai Matsheza, told Business Times.

“As you know we have predominantly participated in the forex auction system to access forex hence an US$0.12 tariff is very difficult for the members.”

Matsheza said with his members grappling with forex shortages, high cost of production and liquidity crunch, industry will struggle to maintain the 56.25% capacity utilisation.

The industry’s exports were around US$176m last year from around US$200m the previous year, with the manufacturers able to supply close to 70% of products on local shelves. “If this demand persists, this will certainly cripple the manufacturing industry and this is not a good development,” Matsheza said.

“ZESA has to ensure the power is back to enable the productive sector to get back on its foot.”

ZNCC president, Mike Kamungeremu told Business Times that the proposal by ZESA was not welcome as most companies do not have the capacity to operate with such huge costs.

“Most of the members are struggling to meet ZESA’s demands and this will take a knock on most companies. Only big corporations have agreed to pay such huge amounts,” Kamungeremu said, adding: “The situation is very tough for manufacturers.”

He said exporters were already paying in US$ with some paying the percentage of their exports.

For now, they are focusing on the productive sector.

Local companies are reeling from rolling power cuts with some companies enduring prolonged unscheduled load shedding of up to 12 hours daily.

ZESA imposed rolling power cuts a few weeks ago due to low generation capacity at its power stations in Kariba, Hwange, Bulawayo, Munyati and Harare.

The power crisis has deepened, forcing companies to use backup diesel generators, which are expensive to run, resulting in growing fears of shortages of goods on retail shelves.

The Zimbabwe Power Company, a power generation unit of ZESA, on Tuesday, generated 1236 megawatts (MW) against a national demand at a peak period of 2 500MW.

The country’s largest coal-fired power plant, Hwange Power Station generated 377MW and Kariba South Hydroelectric Power Plant generated 836MW.

Munyati Power Station and Harare Power Station generated   12MW and 11MW respectively.

To cover for the gap, Zimbabwe imports electricity from South African power utility, Eskom, Mozambique’s Hydro Cahora Bassa and ZESCO of Zambia.

However, Zimbabwe is not getting adequate imports as ZESA entered into non-firm contracts with the regional power utilities, meaning they can only supply electricity if they have a surplus.

Exacerbating the situation is that Eskom and other regional power utilities are also suffering from electricity insufficiency, making it difficult for them to supply Zimbabwe.

Manufacturing processes rely on electric machines that require power to perform precise and repetitive tasks to increase production and now that the chronic shortages of electricity are starting to damage the economy.

The costs vary from direct economic costs, indirect costs, and social costs.

Indirect and social costs are equally important components when considering the impact of power interruptions.

Businesses have lost millions of dollars in potential revenue, threatening the viability of companies.

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