THE Zambian electricity industry is expected to contribute US$2.57 billion to the country’s gross domestic product (GDP) by 2015 from US$1.30 billion due to increased mining activities.
The electricity industry has developed following increased mining activity and currently consumes 50 percent of the country’s generated capacity, Frost and Sullivan energy and power system’s research analyst Salima Zyambo has said.
“Ever since the government opened the mining industry to foreign investment, it has grown tremendously,” he said.
Mr Zyambo told Marketwire, a US electronic public relations publication, that success of the mining industry has rippled into other industries such as manufacturing creating a number of opportunities for the electricity industry.
Marketwire states that despite the market boosters, low foreign direct investment (FDI) and electricity tarrifs could restrict the market’s expansion.
“The fast-paced growth of Zambia’s economy is expected to cause power demand to outstrip supply which will make it imperative to increase the country’s installed capacity,” he is quoted as saying.
Mr Zyambo further states that Zesco’s inability to generate funds internally due to sub-economic electricity tariffs makes the state utility heavily dependent on FDI for power infrastructure construction projects.
Mr Zyambo noted that increasing electricity tariffs and further improving investment incentives for potential investors will improve FDI inflow into the country.
“Providing potential investors with inducement and raising tariffs such that they are cost-reflective will go a long way in attracting the much needed FDI,” he says.
The research finding also says that reduced tariffs may prevent foreign investors from investing in construction projects, which stops the establishment of capacity enlargement projects.
“The success of the industry has rippled government’s goal of achieving 66 percent electrification by 2030”, he told Marketwire.
[Zambia Daily Mail]