By Johnstone Chikwanda
When international organisations such as World Bank and IMF say that consumptive subsidies mainly benefit the well-off in society at the expense of the poor especially in Sub Sahara Africa, it is interesting to see who stands up to fight against this postulation. It is mainly the well-off beneficiaries.
They fight in the name of defending the poor and how the poor will get suffocated with decimation of the consumptive subsidies. Does it mean World Bank and IMF among other local and international organisations have no understanding of how removing consumptive subsidies will “claim the lives” of the poor in our society? Who are the direct beneficiaries and since when did they get the interest of the poor at heart? And who is a poor person?
They fight in the name of defending the poor and how the poor will get suffocated with decimation of the consumptive subsidies.
Energy Forum Zambia has been tracking down the level of subsidies on fuel and electricity in Zambia. The forum has also been keen to see if the $600m spent in the last year to support electricity and fuel consumers has improved the lives of the poor both in urban and rural areas. The forum collates information from direct engagements, research, annual reports, participation in conferences and publicly available statistics such as those published by the Energy Regulation (ERB), Zambia. The ERB is one of the most organised regulators in the African region based on many facets which include the level of information sharing and industry statistics on their website. In most African countries, it is very hard to get industry statistics and annual reports.
The ERB has on its website national fuel consumption statistics. It lists all registered Oil Marketing Companies (OMCs) and their respective market shares. The website shows where the fuel goes to and in what quantities. Based on this data, it can be inferred who uses a lot of fuel in Zambia and where they are located. It can also be elucidated who consumes much of the electricity in Zambia. Historically, electricity consumption is mainly consumed by corporations which include transnational corporations some of which have tremendous global arbitrage.
While there has been some notable improvement in household electrification, Zambia’s household electrification still remain grievously low at less than 26% of national household. Therefore, the biggest beneficiary of electricity subsidies are the corporations. Whether these corporations or industries in different sizes have the interest of the poor at heart when defending subsidies, the answer is in your heart. You can also compare who is well-off between those few households which are connected to electricity with the over 70% households which are not connected.
With regard to fuel consumption pattern, historically it has been industries which consume more although a strange pattern has of late been emerging. On the Cartesian plane of dualism, the ERB categorizes industries as commercial sector while petrol stations are categorised as retail.
The biggest beneficiary of electricity subsidies are the corporations. Whether these corporations or industries in different sizes have the interest of the poor at heart when defending subsidies, the answer is in your heart.
National fuel consumption between these two sectors is almost neck on neck. This scenario is due to influx of automobiles being imported into Zambia not just at personal level but also due to government, non-governmental and industries procuring more and more automobiles for their operations and personal to holder support. These fuel at petrol stations.
The bigger picture though moderated is that industries still consume more fuel. This being the case, it can be deduced that the biggest beneficiary of fuel subsides in Zambia is the commercial sector which also overlaps into the retail since part of its fleet refuel from petrol stations. This commercial sector includes multinational corporations. Whether these should benefit from consumptive subsidies at both fuel and electricity level, the answer is in your heart.
Energy Forum Zambia maintains the view that consumptive subsidies have an overall benefit on those who are already well-off which include owners of transnational corporations. Unsustainable consumptive subsidies especially for a country still classified as poor are not a panacea to resolving economic challenges. To this end, the forum has welcomed the move by Zambian government to remove the fuel subsidy which was triggered by currency deterioration. The same effort should be exported to electricity sector. The forum also takes note of some concerns and agrees with those concerns that there is a way to keep fuel prices low such as government to government arrangement.
This statement was in a broad sense aimed at highlighting the extent of energy sector subsidies in Zambia. It further sought to highlight who the biggest beneficiaries are and to ignite thought whether the impact of eliminating consumptive subsidies consumed by industries including transnational corporations and certain individuals owning automobiles and living in electrified households has a catastrophic impact on those living on less than a dollar per day-the poor. A further cosine was to invite the reader to gaze into this contentious issue using a prism of the poor and thus gain insight of their feelings regarding how you and me; the few of us have shared the $600m consumptive subsidy in one year.
The Author is Chairperson-Energy Forum Zambia and has an MBA, a Bachelors degree in Mechanical Engineering and is a PhD Candidate.