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Monstrous electricity tariff increment won’t solve Zesco’s problems

[By Tuesday Bwalya]

I am still wondering what necessitated the upward adjustment of electricity tariffs.

When Zesco Limited proposed the 113 per cent upward adjustment of electricity tariffs for domestic customers, I thought such a devilish proposal could not be entertained and subsequently approved by a serious regulator such as the Energy Regulation Board (ERB) and government. Alas, the senseless proposal has been approved and has taken effect. What a bad way of starting a new year for Zambians!

This really shows me that we do not have a pro-poor government because its actions are against the poor. The Patriotic Front (PF)-led government has once again kicked the poor Zambians in the teeth; the people that assisted it to ascend to power. This is cruelty of the highest order, and the hike will send many Zambians early to their graves, as it will be extremely difficult for many families to afford basic food items.

I am shocked that ERB has approved the domestic tariff as was proposed by Zesco without any downward adjustments. What was then the purpose of the public hearing called by ERB? Was it just for formality? ERB officials and all Zesco sympathisers have let us down; they have betrayed Zambians.

Further, all those economists and energy consultants who have been calling for the upward adjustment of domestic tariffs are also traitors and are misguided because the issue of Zesco not having enough money cannot be addressed by merely adjusting the tariffs. There are some deep-rooted issues that need to be addressed if Zesco has to be kept afloat.

I want to show you why the monstrous adjustment in tariffs will not help Zesco resolve its financial challenges. I have always said that Zesco’s problems have nothing really to do with the low electricity tariffs, but are caused by poor performance of the economy and maladministration of the power utility. Everyone knows that the Zambian economy has been contracting; it’s growth has been reversing.

In 2019, the economy maybe grew between two per cent and one per cent. This has been due to poor management of the economy characterised by, among other things, inconsistent economic policies, corruption, and senseless borrowing by the government.

For instance, in 2019, copper production fell compared to previous years. Xinhua, a Chinese media outlet, reported in September 2019 that Zambia’s copper production would fall by a massive 100,000 tonnes in the same year. The fall in copper production has been attributed to poor and inconsistent mining policies and the putting of Konkola Copper Mines under receivership. What this means is that the country exported less copper and earned fewer dollars (forex).

Further, due to reckless external borrowing by the government, we have external debt stock which has reached our neck as a country, and in 2019 the country had been paying interest rates in US dollars to various loans. As a result, the country struggled to have more dollars. This pushed high the price of a dollar; the dollar became expensive and we needed more kwacha to buy a dollar. As a result, the kwacha collapsed; it lost value to major currencies.
The loss of value by the kwacha to a US dollar left Zesco struggling to pay its debts which are contracted in dollars.

Many Zambians may not know that Zesco has been borrowing like the government, and its debts are in dollars, not kwacha. The loss of value by the kwacha left Zesco with less money in dollar terms to service its external debt. To Zesco, government and their agents, the solution was to increase electricity tariffs. According to them, the tariffs were too low, as a result Zesco was struggling. No, no! The tariffs have not been too bad; it is because our kwacha has depreciated greatly. As long as the economy is not fixed by the government, the 113 per cent tariff increment Zesco got will not solve its problems; it will soon be meaningless to the company’s management and their agents, and they will soon cry for more increments.

The other reasons that have caused Zesco’s financial challenges are its internal problems which need to be fixed. The first one is over-employment. Zesco is one of the parastatals that has been abused by politicians and politically inclined persons for jobs. Relatives of ruling party officials, PF-alligned musicians’ wives and others go for jobs at Zesco.

The company is forced to employ even when there is no vacancy, as long as the politicians’ acquaintances want employment, and Zesco management cannot say no. As a result, the wage bill at Zesco is unnecessarily very high. Much of the money collected by Zesco goes to pay salaries. Even if the company has received the 113 per cent tariff increment, the money it will collect from the poor Zambians will end up paying salaries, not improving service delivery.

Similarly, Zesco management is wasteful and careless in the manner it manages the power utility. I say so because, how could a normal management allow each employee to be getting free power of up to 2000 units per month? It is wastefulness of the waste kind and it has to be reversed. Further, Zesco has to improve its procurement systems and do away with the tendency of awarding contracts to PF cadres who end up inflating the cost.

As I conclude, I wish to say that the government needs to fix the economy because a poor economy results in a weak kwacha which affects Zesco’s ability to service its external debts. I wish also to say that Zesco has to be restructured; reforms have to be implemented so that the company becomes efficient if Zambians have to see gains from the devilish 113 per cent hike in electricity tariffs.

The author is a lecturer at the University of Zambia, department of Library and Information Science.

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