RESUSCITATE THE ECONOMY; INCREASE ELECTRICITY TARIFFS

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President Edgar Lungu Being Sworn in By  the Chief Justice Irene Mambilima
President Edgar Lungu Being Sworn in By the Chief Justice Irene Mambilima


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.

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 MW from 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

33 COMMENTS

  1. +11
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    David Kapoma you have done well to lay out the hard truth on this. Unfortunately it may fall on deaf ears.

    Lies and deception are the order of the day. The fact of the matter is that this PF Government has caused the current problem. Their claim that it was the result of drought is SIMPLY NOT TRUE!

    The LOAD SHEDDING has been the result of PF cancelling Kafue gorge lower in 2011. If they had not done that we would have not had the present situation as it would have been in stream by now.

    • +4
      -5
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      This deficit can be reduced by Government repriortising distribution of power from the extractive industries to the small business person. The mines consume a lot of energy and cripple all other sectors, surely they can afford their own power companies? We cannot punish the Zambian tax payer, fix distribution and not tariffs for the consumer!

  2. +3
    -13
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    You must be joking! Why should power go up when the cost of living is already high? Does it mean if Zambian electricity tariffs are low, its a sin? Does load shedding come as a result of the poor people? You must be a West African, whose country is full of gen sets and you are becoming excited for having power 10 hours per day and think stupidly. You have not included the poor people in your opinion Bwana and I suggest you ask LT to retract the article and bring it back after your grand mother reviews it.

    • +8
      -4
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      @ Activist, you should understand what is happening here. This is the cost of incompetent, ignorant and corrupt Government.

      In the euphoria of being elected, PF failed to understand two simple facts in 2011. One was the increasing demand and importance of electricity to Zambias economy, and the other was the long lead times needed to build and commission power plants. Instead of focusing on what Zambia actually needed – electrical power – to drive economic growth, they decided to borrow huge sums to build roads.

      Now in 2015 this misguided thinking caught up with them and after wasting a whole years supply of water by just throwing it out in 2011 Zambia entered the era of load shedding. What did they do then? They tried to catch up by hurriedly getting solar power and coal plants,…

    • +7
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      What did they do then? They tried to catch up by hurriedly getting solar power and coal plants, plus importing to cover up their ineptitude – the MOST EXPENSIVE ways to generate power!

      And now who will have to pay? Yes, you got it. The poor people of Zambia will have to pay for these PF mistakes.

      And what will PF do? Lie to us that it is due to “DROUGHT” and have another “day of prayer”.

    • +3
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      ACTIVIST. THE POINT HERE IS THE POOR PEOPLE WON T REALLY FEEL THE TARIFF INCREASES AS THEY DO NOT HAVE POWER BUT FOLLOW BLINDLY TO VOTE FOR MORE POVERTY.

  3. +14
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    Activist you missed a point Mr. Kaplan raised. He is looking at the economical outlook and he raises very interesting points here. If really you don’t get him then you are the.one who has to be checked Sir. Truth be told.

  4. +7
    -1
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    Fuel tariffs are going up and Zesco will be managed by an external organisation Poor of not Zambians will have to dig deeper into their pockets to pay for electricity and oil. Food is going up too. All agricultural subsidies will be removed before the end of this year. This is a recommendation made by IMF. Government will have to cut civil service and will need to reduce on spending. new measures coming in soon to help Zambia’s economy recover. This is what PF government means by SACRIFICE

  5. +6
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    Zambia today is not the same Zambia at independence, most of the problems we are facing as a country today, where created between 1964 and 2001.
    Between this period, the leadership did not pay attention on the need to expand in infrastructure and in any other area of development. so let us not through the blame on the current government.
    Blame games are a hindrance to development, we just need to support one another as a country and seek best ways of ending the problems our parents put us in during their times as leaders, they are now old and the country is in our hands, let’s be innovative and see to it that solutions benefits us and our children’s children.

    • +2
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      vote

      @The Seb, you are right, blame games are a hindrance to development. But an analysis of past mistakes is important to learn lessons, and how to avoid repeating them in the future.

      Denial and shifting the blame for political gain is what takes a Nation backwards fast. Honest and open debate exposes mistakes and brings forth solutions.

      When the PF “blame” load shedding on the drought they are being extremely economical with the truth. Droughts will happen. We will have El Ninos and La Ninas every seven years or so. An intelligent Government will gather the facts and plan for those eventualities. Have they done that?

  6. +6
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    vote

    This is a really enlightening and well written for a layman like me to understand. BA LT can you go a step further and encourage those in the various stakeholder positions to respond to some of these articles so the public can participate and witness well informed debates. How about requesting a response to this article from the head of ZESCO or the permanent secretary at Ministry of Energy or even the Head of ERB. That should be your role Ba LT as the media.

  7. +5
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    Zambian President Edgar Lungu has pledged to remove or reduce energy and agricultural subsidies as part of a loan deal with the International Monetary Fund that could top $1.2 billion, his spokesman said. “Straight away when the IMF program begins, subsidies will significantly go down in the energy sector,” Amos Chanda said in an interview on Wednesday. “The president has promised to move rapidly to either completely do away with subsidies or progressively reduce them.” Fuel and power subsidies alone could cost the government $660 million this year, according to the Washington-based lender.

  8. +1
    0
    vote

    It is not about who is at faul, it is all about where the country is headed. We can choose to sit on own hands and ignore the situation or act and stop it from total collapse. Sata promised his supporters that he would give them money and a better life within 90 days, it never happened. Chiluba said the HOUR had COME – the Zambian people waiting but the HOR NEVER CAME.
    TRUE…! We do live in a blame culture though – if there is no food at home blame the mother or the wife. If a game of football is lost, blame the coach or the trainer and manager

  9. +1
    -6
    vote

    kapoma when did you write this article? its quite outdated. review and post a clean one if you want to be relevant.

  10. +7
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    What happened to the $500 million spent to rehabilitate Kariba apart from the Questionable generators installed ? When borrowing that money we were told by PF load shedding will end. But now no one can account for that money, it seems to have disappeared.

    For your information the Chinese generators installed at Kariba no one can find a spokes person for the company that done the work or a spokes person for the manufacturers so as to get information about the install. It seems the work was done on the black market either no one accountable.

    And the British generators stripped out have been sold and are already working.

    • +6
      0
      vote

      @Spaka like Lilo,

      I have formulated a plan, approved by EU engineers, to save the country over 200 million USD for the repairs required to Kariba dam.

      I have explained it several times in interviews on radio. To date there has been zero interest in this from those in charge.

      I challenge ZESCO and the ZRA to contact me for details. My number is 0962648682.

      Besides cutting the cost by two thirds, it will permanently ensure Kariba always holds the maximum amount of water, and never needs such repairs again.

    • +5
      -1
      vote

      Engineer

      Unless you off state house a 30% cut of that cost, no will consider your proposal.

      If you offer 30 % of the cost as commission to state house even if your proposal is usless to zambia and can not pass expert scrutiny , as long as it is plausible to the masses and the dumb **** in parliament, you got the deal…..you are hired….

  11. +1
    -5
    vote

    Mr Kapoma makes a case for INVESTORS. However, this write up fails miserably to make a case for Clients users. It’s really patronising to make a case for increase on grounds that it will ‘Educate’ Zambians in careful consumption, by not living Irons, lights etc….on all day!!! REALLY? Who does that?
    MAKING A CASE FOR USERS
    The thrust of this arguments should be the Low, Intermittent Salary Payments. Companies/Employers pay their staff when they want. STOP THIS by Legislating. It is a Criminal behaviour that leaves families without income to pay for this ‘fancy’ electricity. Most people, even the rich have a charcoal Brazier to cook on. Low unemployment in Zambia can be alleviated by promoting entrepreneur activities through Small loans, Local Community awards to the best…

    • +1
      -6
      vote

      Low unemployment in Zambia can be alleviated by promoting entrepreneur activities through Small loans, Local Community awards to the best business to encourage others. People in Zambia are rising to the challenge. The last thing we need is to allow INVESTORS who want everything cheap to ‘invest’ such that they make high profits at the cost of locals. The gov’t needs to understand the negotiating stance known as ‘it is what it is,’ you want in on Zambian economy, you come in to do business OUR way and supporting the locals. The subsidies must be met by the INVESTORS. They MUST pay to get out from our economy.

    • 0
      -5
      vote

      Cheap labour is enough. I don’t know anyone in Zambia who is not doing something to earn or increase earnings. I have Friends selling cakes, plants, etc. In the front of my mothers plot, we have 8-9 Kantebas, given to local enterprising women who are selling vegetables, MTN top ups, Eggs, as the plot awaits developers and legal documents, they are allowed to have use of the land which is by a road. I think that lots others who can help out locals MUST do so. Helping each others must be our motto going into austerity. Subsidies must remain, if perhaps altered by a ‘very’ small increase. We can’t be an ‘investors’ economy.

    • +6
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      Patriot Abroad, selling at the kantemba can only sustain one to have a meal and not enough fro expansion

    • 0
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      @Kaluwa

      Your perception is wrong. Maybe you have an image of a particular Kantemba, not the ones I am reporting here. The ladies are doing proper Vegetable Market stall business! They are reporting good money, and some are getting loans to increase their product range!

  12. +6
    0
    vote

    Maamba power plant is 300 megawatt but is currently producing 150 megawatts and the owners are arm twisting GRZ to increase tariffs for them to start the balance. They also said the can go to 600 if this is done.
    ECL also hinted Atomic Energy
    Like others have pointed out, add more meat to articles and be up to date
    Consumers are also at breaking point and businesses will go bust.

  13. +6
    0
    vote

    This article is very good and all needs are suggestions and not insults about any political party. I 100% agree with the article that the Zambian electricity tariffs are not a correct reflection of the costs incurred and that as such investors are not ready to risk their finances in such industries. I feel fuel energy should be revisited too. Government is spending a lot on fuel subsidies where the beneficieries are the elite in society. why provide a subsidy to a man that drives a benz car and charge heavily a poor citizen that uses electricity for basic lighting. why not:- remove completely fuel subsidies, allow big companies import their own fuel (with relevant taxes ofcourse), have different electricity tariffs for different institutions, zero rate taxes on all imports related to…

    • +6
      0
      vote

      You sound like Sata. If anything the subsidies benefit the high density area. In some cases K 50 worth of electricity can last them a month yet they also have electrical gadgets. Compare that to a household who has to spend K400 a month and the geyser might be the only thing that brings in the additional cost.Usually the household in the high density areas care less if they leave their lights on 24/7

  14. +4
    0
    vote

    Ecl promised to increase electricity when he was reversing the increment. This is not new and ECL is just waiting to bring more misery on the poor

  15. 0
    -4
    vote

    One thing to note is the behaviour of Power a corporations worldwide. Even with high or variable tariffs, they always aim to make high profits out of consumers. Even here in UK bills are high even with shopping around, among different suppliers. Most people groan about how profits do not lead to lower bills. Some types like metered power is charged at higher standard prices than those on bills. It’s lucky for citizens that currently with poverty, unemployment being High, they can at least have some help.

  16. +3
    0
    vote

    We seem to have a very short memory span on power issues. How many articles have we seen where loans have been signed for new power stations or works to increase existing capacity but after some time it’s the same old story of load shedding? Increasing tariffs would only lead to exploitation because our government structures which should protect against this are weak. You just have to look at telecommunications, are you getting value for money? Zambia needs to invest at least $4 billion in the energy sector alone to resuscitate the economy. The Kariba project was seen by many as an ambitious project but looking back, it’s been the heart beat of this country. We need more brave men to rewrite our dream. Late Mwanawasa came close to doing that.

  17. 0
    -3
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    Ba Upnd insults will not help. I am sure your prayer is that the government fails. If you have ideas float them instead of floating your election frustrations.

    • +3
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      @ Ndanje khakis, I an not UPND and I certainly do not hope any Government of Zambia fails.

      I am a concerned Citizen and I have a very cost-effective solution that I am offering the Nation at no cost at all. After a lot of effort at my own personal cost, I have tried to put this forward to the various agencies concerned but have not received any response. Please do not accuse me of not having “floated” it!

      My comment above at 11.1 was posted a couple of days ago. My number is there.

      This will save the Zambian Taxpayer over US$200 million. Have I had any response? ZERO!

Comments are closed.