Zambia's Proposed Power Prices Seen Devastating Factories, Farms

  • Tariffs to increase by as much as 248% under proposal
  • Zambia facing biggest power shortfall on record this year

Power-tariff increases proposed by Zesco Ltd., the Zambian state-owned electricity supplier, would lead to a collapse in manufacturing and threaten the livelihood of farmers, lobby groups have told public hearings on the plans.

The price rise the company is asking for would translate to increases of as much as 248 percent for factories, Maybin Nsupila, chief executive officer of the Zambia Association of Manufacturers, said Tuesday in Lusaka, the capital. “The manufacturing industry in Zambia is going to collapse completely,” if the Energy Regulation Board approves Zesco’s proposed increases, Nsupila said.

The jump in costs would be “disastrous for farmers,” said Humphrey Katotoka, economist at the Zambia National Farmers Union.

The southern African country is facing its worst power shortage yet as low water levels at the hydropower dams it relies on for about 95 percent of electricity generation curb supplies. One of the reasons Zesco has put forward for more than doubling prices for commercial and residential customers is that new power stations will cost more to operate, and that low tariffs have discouraged investment.

The kwacha's slump has driven up costs for Zesco

A slump of more than 50 percent in the kwacha against the dollar this year has also driven up costs of imported equipment, Bestty Phiri, acting managing director at Zesco, said at the hearings.

Both the farmers’ and manufacturers’ lobby groups said they understood the need for higher tariffs, but said the increase was too great in too short a period and should be staggered over a number of years. Factories are already struggling because power rationing has cut production by as much as 70 percent in the last six months, Nsupila said.

“Firms are barely surviving,” he told the hearings held by the Energy Regulation Board, which will decide on Zesco’s application. “We need to safeguard the little production that is taking place.”

Zesco needs the front-loaded tariff rise it applied for and can’t afford staggered increases because it needs the funds urgently to expand electricity generation capacity, Phiri said.

’Emergency Situation’

“We have to borrow money now and we have to inject those monies into building power plants,” he said. “We need a tariff increase upfront. We are in an emergency situation.”

Zambia’s annual inflation rate almost doubled to 14.3 percent in October as the power crisis and plunging kwacha pushed up prices.

The energy regulator last granted Zesco an increase in July 2014 of 15.4 percent for commercial users and 24.6 percent for households. Zesco didn’t include mining companies, which consume about half the power in Africa’s second-biggest copper producer, in its application to increase power prices because of a continuing court case over last year’s increment.

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