Some industry leaders are calling for a ZESA tariff hike calling the current tariffs unsustainable. These leaders are afraid that if the current rate of tariffs is maintained by the government sooner or later there will be no electricity. Since electricity is needed to pump water they also fear an ultimate doomsday scenario where there would be no water either.

Confederation of Zimbabwe Industries (CZI) president Mr Sifelani Jabangwe, however, urged the government to make sure that they strike a balance and not raise the tariff too high.

I think the tariff probably now needs to review because even if you look at it against the interbank rate, the tariff has now come down from the average tariff of US$0.0986 to just over US$0.03.

We have always said we want it to be around US$0.05 or US$0.06 but it is now way below that. So, clearly a review of the tariff is necessary otherwise we won’t have electricity, we won’t have water. What we are just worried about is that the review should not make us uncompetitive.

Zimbabwe National Chamber of Commerce (ZNCC) president Divine Ndhlukula seconded these remarks. He, however, added that a tariff increase could be inflationary:

When you convert the kind of money we are paying in RTGS$ compared to what we were paying in US dollars, Zesa is now cheaper. The kind of level (new tariff), I would lie but there is a need to review the power tariff. It’s unfortunate that it would push up inflation.

So it’s a catch-22 but three need to review the power tariff. The new tariff, if it was to come, should take into consideration affordability for some people and of course some cost recovery for Zesa to be able to import power.

There is no doubt that a tariff increase could help ZESA however given the energy situation in Zimbabwe and past experience that money will probably not benefit the power utility’s electricity generation. Nor will it be used to maintain the power grid. Like all government-owned entities, ZESA’s management has a penchant for awarding themselves high perks while neglecting infrastructure.

In any case, a tariff hike will simply trigger inflation which will lead to another demand for salary increase. If that demand is heeded it will drive costs further and weaken the bond necessitating another ZESA tariff hike as we hurtle towards hyperinflation. The best solution in the short term is for the government to prop up ZESA directly.