Zesa, industry negotiate tariff reduction

CZI president Kurai Matsheza told Standard business that they were locked in negotiations with the authorities to have the regulations amended .

THE Confederation of Zimbabwe Industries (CZI) is negotiating with Zesa to reduce electricity tariffs that exporters have to pay in foreign currency, it has been revealed.

In July 2022, government issued Statutory Instrument (SI) 131 of 2022 paving the way for exporters and partial exporters to pay for power and related services in foreign currency only.

 This was followed by SI 9 of 2023 legislated in January that continued the initial measure right through to June this year.

However, in its January monthly report, CZI reported that there had been an industry outcry that the move is adding pressure on the much-needed US dollars in the formal market.

CZI president Kurai Matsheza told Standard business that they were locked in negotiations with the authorities to have the regulations amended so that the tariff are linked to individual exporters’ level of foreign currency earnings.

 “On that issue, we are still engaged with the authorities, particularly, the utility itself,” Matsheza said.

“Just to say that it can be looked at in terms of linking it to the level of foreign currency generation depending on exports or even the domestic sales themselves.

“So, a guy who is generating forex to the extent of 50%, the bills should reflect that in terms of what they are billed at.

“Those that generate more or 100%, yes maybe that can be looked at, but these are discussions that we are carrying on with the utility and hope that at some stage we will get somewhere.”

As the formal sector is required to offer transactions in both domestic and foreign currency at a margin of no more than 10% above the interbank exchange rate, CZI said industry’s   forex availability is limited.

This is attributed to the huge disparity between the official and parallel exchange rates, respectively, that has risen to US$1: $945,93 and US$1:$1 700.

As a result most US dollars are traded on the black market where the premium between the official and market exchange rates is large.

“Zesa has a huge demand shortfall which is being managed through power cuts.

“They also import electricity and pay in US dollars and thus need to access foreign currency.

“However, while this need is clear, the liability for raising this foreign currency should not be passed on to business,” CZI said, in a research report shared with its members in January.

“Rather, Zesa should be able to purchase foreign currency from the auction or WBWS (Willing buyer willing seller) like every other importer, rather than getting the prerogative of charging in only one currency in a dual currency environment, where businesses earn a portion in Zimbabwe dollars.”

According to the report, induced costs, such as power outages that damage machinery and higher production costs from using alternative energy sources are already a reality for the sector.

 CZI found that taking payments for electricity in US dollars will further complicate international trade and promote dollarisation, which has more drawbacks than benefits for the corporate world as a whole.

“The share of fuel in imports increased from 17% in 2021 to 26% in 2022,” CZI said.

“In addition to increased economic activity, the intensified load shedding in 2022 also imposed pressure on diesel imports to power generators for both households and industry,” CZI said.

In 2022, when demand was significantly lower than supply, load shedding became very common.

By the end of the first quarter of this year, the situation has continued to remain dire.

At present, peak demand for electricity is 1 500 megawatts (MW) to 1 700 MW while generation capacity has been averaging only 600 MW.

While Zesa imports between 300 MW and 450 MW of power from Zambia, South Africa, and Mozambique, the daily power supply imbalance during peak hours is well over 900 MW, according to CZI.


Related Topics

Currency crisis hits FCB capital
By The Southern Eye Aug. 28, 2022
CZI ink US$300m industrial facilities
By The Southern Eye Aug. 28, 2022
Masunda lands global sugar industry position
By The Southern Eye Aug. 21, 2022
Boustead Beef seeks to end CSC corporate rescue
By The Southern Eye Aug. 21, 2022