Zimbabweans should brace up for hefty increases in electricity charges if they are to save the Zimbabwe Electricity Supply Authority (ZESA) from further financial erosion that will plunge the parastatal into even much larger deficits.
The vice-President of the Commercial Farmers union, Anthony Swire-Thompson says he was informed by ZESA recently that “just to balance its books -without provision for capital expenditure, it needed an increase of 85 per cent with immediate effect”.
ZESA, however, recognised that this was impractical as it would have adverse effects on the whole country. This puts the parastatal in a tight squeeze as on the other hand under its governing Act, ZESA’s revenue must come from the consumers and must not be subsidised. It can only raise loans for capital projects.
ZESA needs to finance capital projects worth a total of $4 billion during the current structural adjustment programme to meet the country’s power needs. With Zambia cutting its power exports Zimbabwe could be forced to seek alternative power sources much sooner than it had anticipated. This is likely to be at extra cost to the parastatal.
The situation is likely to be worsened by the current drought which could result in some internal thermal power stations, like that in Bulawayo, for example, being forced to operate at a reduced capacity -if they are not completely closed down- because of the shortage of water.
The power authority, which was making hefty profits after its formation, seems to be putting most of the blame for its losses on government delays in approving increases in electricity charges. The government on the other hand has been arguing that it is merely protecting the consumers and ZESA is not performing well because of mismanagement.
The continued deficits the parastatal has been making resulted in bitter squabbles between Energy Minister Herbert Ushewokunze and former ZESA chairman, Richard Harlen. There have been counter accusations of corruption and interference. There have also been calls for a commission of inquiry into the parastatal as well as for the resignation of the two bosses, Harlen and Ushewokunze. Harlen has since been removed.
Swire-Thompson says the current debate on tariffs started in March last year when ZESA submitted proposals for a 35.5 percent increase to be implemented on July 1. This would have resulted in a revenue of $872.1 million.
The minister only approved a 20 per cent increase on July 16 . The increase was with effect from that date but was impossible to implement. This, he says, resulted in ZESA losing one month’s revenue, with the revised revenue figure dropping to $761.5 million.
To make up for the shortfall ZESA was advised of an additional tariff increase of 15.5 percent in September. However, due to the lengthy procedure that had to be followed the increase only became effective on December 1.
Because of these delays ZESA needs an increase of at least a further 10 per cent effective form March 1 to reach its original target.
Swire-Thompson says ZESA is now talking about the need for substantial tariff increases for the next three years and they believe 35 per cent a year would do. The parastatal will, however, have to convince the government about the justification for these increases.
There are also fears that the increases could lead to a reduction in demand by consumers who have become used to small annual increases. On the other hand without the increases, ZESA will find it difficult to meet its debt obligations.
The delays in granting ZESA tariff increases it has requested has also led the parastatal to breach its protocol. The parastatal is required to give consumers one-month’s notice of its proposed increases but Swire-Thompson says this was not done last year.