eBusiness Weekly
Nelson Gahadza
The Confederation of Zimbabwe Industries (CZI) says the blanket decision to bill local companies exclusively in United States of America dollars for electricity and the new tariffs is threatening business viability at a time the power supply situation still remain critically unstable.
The Zimbabwe Electricity Transmission and Distribution Company (ZETDC), reviewed a new electricity tariff level of US12,21c/kWh for all exporters, while all foreign currency earners are required to pay their electricity bills in US dollars at an average tariff of US10,63c/kWh.
The changes were backdated to 1 October 2022 for Maximum Demand (MD) customers and 14 October 2022 for the rest of the consumers.
According to CZI, since then, selected businesses that are non-exporters have been receiving bills that are in 100 percent foreign currency regardless of foreign currency sales, export levels and other considerations.
“The new tariffs were largely expected to usher in improved power supply and speedy fault resolution.
However, the power supply situation in the country remains erratic to a level where some consumers are experiencing an average of 10-12 power cuts daily while others go for days without power and before faults are resolved,” CZI said in its position paper on new ZETDC tariffs and 100 percent USD Billing.
Power supply has remained constrained due to frequent breakdowns at the country’s major power stations.
ZESA has pointed out that it is currently not capacitated to provide adequate power due to power supply gaps, viability concerns and antiquated equipment that frequently breaks down.
According to CZI, the situation has significantly affected business cash flows, threatened business viability and competitiveness of the local products at a time imports are gaining foothold in the local market due to dollarisation.
The industry representative body said the cost of production has shot through the roof with most producers running on diesel powered generator sets which require significant forex outlay.
“Capacity utilisation in the sector has dropped as most businesses cannot operate on the usual number of shifts due to power cuts, this means that productivity no longer matches fixed costs of running plant and machinery.
“Significant time is lost when there is no power during daytime. This also takes into consideration the fact that generators cannot be run continuously without rest,” CZI said.
The industry representative body said producers are struggling to meet supply deadlines for the local and export markets, which poses a threat to well-developed export markets and foreign currency earnings.
CZI said it is key that ZETDC Bills be matched to local versus forex sales rations as the Zimbabwean dollar is legal tender and refusing to accept it from customers is illegal under SI 127 and other regulations.
“Similarly, the Auction rate should be used as the reference point in terms of conversion to local currency in bill payment as is the case on product pricing,” CZI said.
The industry representative body said in order to create a level playing field and fairness, consumers should be treated the same on effective tariffs, billing and payment modalities, unless a special
dispensation is warranted for national cause.
CZI said there are fears that a high US Dollar tariff will not result in improved power generation or importation of more power to plug the supply deficit.
“Businesses have found it hard to structure production shifts, open doors, procure alternative energy on time and plan on raw materials stocking due to the intermittent nature of the power cuts.
“ZETDC should do more to communicate schedules for the power cuts on time to allow for planning and allocation of resources,” reads part of the position paper.
According to the position paper, settlement of electricity bills in foreign currency should consider forex retention levels for exporters which is at 85 percent and local deposits account holder retains 85 percent.
“Thus, electricity bills should be settled off the retained earnings. Currently,
consumers must find supplementary foreign currency to settle bills in foreign currency.
“The current level of retained forex is acting as indirect taxes on businesses due to the misalignment between the formal and the widely quoted market exchange rates used to source supplies,” CZI said.
According to the CZI position paper, ZETDC should do more to communicate schedules for the power cuts on time to allow for planning and allocation of resources.
