I think we now possess a clearer context for examining the upcoming ZESA tariff increases. We now understand that as long as any product/service is not free, it will be considered too expensive by most Zimbabweans.
“61% of employed Zimbabweans earn less than $12.66 a month,” is all the context we need.
So, it is not going to be good news for many to hear that there is a plan to steadily increase ZESA tariffs. The Minister of Energy and Power Development revealed that the plan is underway. Said he,
So, we would like to move our tariff of course without curtailing producers, miners, farmers and manufacturers but move steadily so that the utility is stable and able to carry out its maintenance and power generation…
The planned tariff increases are not to punish urbanites for voting against ZANU PF but to capacitate ZESA. Or so they say. In fact, the Minister believes the nation will get behind the tariff increases,
As Government, we have come up with a roadmap to energy self-sufficiency and we want to get to where we have energy security and to a point where people will say ‘raise tariffs so that we get service’.
Zimbabweans calling for tariff hikes? That will be the day. However, for as much as we are earning very little, I believe a significant number of Zimbabweans would welcome tariff hikes if it meant we could have reliable service.
It’s no secret, there are imposed limits on what ZESA can charge, much like it is for the telecommunications sector. So, price controls by another name.
Unfortunately, as Zimbabweans who were around in the hyperinflation era of the noughties know, forcing sellers to charge less than what makes sense for their business leads to empty shelves and terrible service.
However, is it actually the case that ZESA tariffs are too low? Could it be that they are being controlled so as not to overcharge us?
Are ZESA tariffs low?
We have been talking as if it’s given that ZESA’s tariffs are too low. Let’s check whether that’s true.
ZESA’s weighted average is now US13.28c per kWh. The tariff structure we have means no one will be paying that much. It will depend on your usage. The listed tariffs below are for each kWh:
- First 50 units – 6 cents
- 51-100 units – 7 cents
- 101-200 units – 11 cents
- 201-300 units – 16 cents
- 301-400 units – 18 cents
- 400 and above ~ 18 cents
We converted the ZW$ tariffs to USD using the bank rate of 1:5756. It would be less if we used the black market rate.
Let’s compare that to what Eskom is charging in South Africa. In the city of Johannesburg, the average price per kWh is R234.73. This is awkward because that converts to about US13c. ZESA is charging US13.28c and down South, they are paying slightly less.
The South African schedule looks like this:
- 350kWh or less – R1.8237 per kWh (US10c)
- Up to 500kWh – R2.0919 per kWh (US11c)
- 500kWh and above – R2.3836 per kWh (US13c)
Average household consumption
This may still be confusing. Let’s use an example to clear it up. The average Zimbabwean family consumes 250kWh a month.
In Zimbabwe, that would cost about US$31, if you exchanged your USD to ZW$ at the bank rate. It could be as low as $25.67 if you changed your USD to ZW$ at a black market rate of 1:6800.
In South Africa, the same 250kWh would cost US$25.
So, it does not appear that ZESA is charging any lower than our Southern neighbour. ZESA is charging more even if you “burn” your USD.
Okay, South Africa has its own electricity shortages, so maybe both it and Zimbabwe are charging too little to be able to provide adequate service.
Let’s look at our Northern neighbour, the one we share Kariba with, to see what it’s like there.
Here is the relevant residential tariff in Zambia:
- Up to 100kWh – K0.40 per kWh (US1.7c)
- 100kWh – 300kWh – K0.95 per kWh (US4.1c)
This means 250kWh would cost US$7.89 in Zambia. Dude, the Zambians are just making a mockery of us. Remember that the same 250kWh costs between $25-31 in Zimbabwe.
So, can we really say ZESA is charging too little on this evidence? I don’t believe we can.
- Up to 200kWh – P0.9385 (US7c)
- More than 200kWh – P1.3663 (US10c)
This means 250kWh would cost US$19.05 in Botswana. Again, this is much lower than what we are paying in Zimbabwe.
Zim vs the region
Here is the summary of what we found out above. A household that consumes 250kWh a month (which is the average consumption in Zimbabwe) would pay this much in USD in the different countries:
- Zimbabwe – $31 (or $25.67 if the household earned USD and converted at the illegal black market rate)
- South Africa – $25
- Botswana – $19.05
- Zambia – $7.89
It’s been this way
Back in 2017, we did a similar comparison and Zimbabwe was still much more expensive than its regional counterparts. You can read more on that here:
On this evidence, we can safely conclude that ZESA has 99 problems but tariffs ain’t one. They are already charging competitive tariffs.
So, this plan to steadily increase tariffs is not justified. At least not by saying we are charging too little.
If the argument is “We neglected to maintain and expand our power generation and transmission capacity since gaining independence and so we now need to charge more so we can rectify the situation,” then that’s a different argument and that would be more accurate in my opinion.
So, yeah, tariffs will be steadily increased but let us not lie to ourselves and say we have the lowest tariffs in the region.
The currency issue
The only caveat to this is that our tariffs are pegged in a currency that cannot hold on to its value. So, while today we can say we charge competitive prices, the situation will be different in a few months’ time if the ZW$ slides against the USD.
Before the tariff hike earlier this month, 250kWh cost about US$19.76 using the bank rate and about US$16.36 using the black market rate.
That was still not the cheapest in the region, but it was still competitive. The ZW$’s decline rate has slowed and so the tariffs are not falling behind as quickly as they did earlier in the year.
Anyway, prepare yourself for steady ZESA tariff hikes. Justified or not, they are coming.