The Zimbabwe Electricity Transmission and Distribution Company (ZETDC) has accumulated a loss of more than $500 million, their Commercial Services Manager Richard Mariwa has revealed. This is due to non-cost reflective tariffs. It may well be, but there are other issues at play here as well.
Speaking at the electricity sector meeting in Harare, Mr Mariwa said, “…For the past years, ZETDC has been operating with a non-cost reflective tariff. It’s not only sub-economic but ridiculous…This has also or will result in creditors seeking legal action or charging exorbitant prices. Apart from that, it has resulted in increases in losses for the power utility. We have accumulated losses more than half a billion dollars.” He added that the viability challenges have also caused delays in attending to faults and the company sometimes has to defer planned maintenance due to lack of resources. Infrastructure is also outdated. As such, nothing short of a financial bailout will resuscitate ZETDC. But, getting funds is one thing, using them effectively is quite another.
Tariffs
Currently, ZETDC charges RTGS 9.86 cents per kilowatt hour (kWh) since 2011. This translates to US 4 cents using the interbank rate of 1:2.5. It is believed that they are seeking to increase this to RTGS 15 cents per kWh which is US 6 cents. Government seems reluctant to approve this perhaps due to fears that it may add to inflationary pressures. Neighbours Zambia are charging US 6 cents and Mozambique are at US 12 cents while South Africa is at US 8.6 cents. The problem is that our currency has changed from being at par with the US dollar to the current 1:2.5 interbank rate. If we use parallel market rates, our electricity tariffs become much cheaper in US dollar terms than what our neighbours are charging.
This issue has been topical for the last few days with rumours circulating that a 150% increase was on the cards. Both government and ZETDC have refuted these claims. Eskom in South Africa, where we get some of our electricity, is also lobbying for tariff increases. While it is normal for governments to subsidise their citizens, doing so at the expense of the sustainability of parastatals is not the wisest thing to do.
Other challenges
Over the years, ZETDC has been crippled by failure to collect about $1.07 billion which it is owed by defaulters. Chief culprits are the local authorities, domestic consumers, parastatals, government departments, farmers and miners. Local authorities alone account for 32% of this amount. This is an own goal on the part of government. Although the introduction of pre paid meters has improved what ZETDC collects, there is need for lasting solutions to the settlement of what they are owed. Unfortunately, this is not the only issue. ZETDC has borrowings of over $1 billion which it still needs to pay back. That amount keeps accruing interests and the problem cannot be simply wished away.
Government interventions
Government has been concerned by the performance of its parastatals for a while now. More recently, the Transitional Stabilisation Programme (TSP) proposed the re-bundling of the Zimbabwe Electricity Supply Authority (ZESA). This will mean that all five units of ZESA which include ZETDC and the Zimbabwe Power Company (ZPC) will be merged and operate as one, run by one board. This is expected to curtail inefficiencies, boost generation capacity and improve viability. Finance and Economic Development Minister Mthuli Ncube recently revealed that government has approved this arrangement. State owned enterprises have a history of gross mismanagement and other ills. These still need to be sorted out if the re-bundling of ZESA is to be a success story.
Solar energy
All over the world, the use of solar energy is gaining a lot of ground. Not only is solar energy environmentally friendly, it is also cheaper. Perhaps government should consider heavily investing in solar. Progress towards this is poor though. The Gwanda Solar Farm which was to be our flagship project was delayed and court cases will decide its fate. All hope is not lost however. Econet’s Ugesi Energy and others have re-ignited the momentum in electrifying rural communities. Government can either partner private players or go it alone. Our weather is conducive to solar energy generation and this is an opportunity for ZETDC to cash in.
While tariff increases will improve ZETDCs cash flow, clearly, there are a lot more interventions needed. Without these, we will talk about the same problems over and over again.
