eBusiness Weekly
Oliver Kazunga
The mining industry has expressed concern over the recent increase in electricity tariffs saying this will weigh down on production going into 2023.
Last month, the country’s power utility through its subsidiary, the Zimbabwe Electricity Transmission and Distribution Company (ZETDC), increased electricity tariffs by 42 percent with exporting customers now required to pay an average of USc12,21/kWh, while other foreign currency earners now pay USc10,63/kWh.
The power utility also increased the local dollar tariff component for ordinary consumers effective October 14, 2022.
The increases for exporting customers such as mining and manufacturing companies and foreign currency earners, are effective October 1, 2022.
The power tariffs adjustments follow an approval by the Zimbabwe Energy Regulatory Authority (Zera).
The Chamber of Mines of Zimbabwe, which represents large-scale miners in its report on the state of the mining industry and prospects for 2023 presented in Harare on Wednesday, ranked power constraints as the greatest challenge constraining the mining industry.
“Constraints in the mining industry (ranked by order of severity) are power outages, high cost structure, foreign currency shortages, and obsolete machinery and equipment.
“Survey data shows that respondent mining executives are expecting approximately 42 percent increase in the proportion of electricity costs to total cost of production,” reads part of the report.
The survey findings also show that an estimated 47 percent of respondent mining executives expect the overall cost of production to increase by between 10 percent and 20 percent next year and about 33 percent of respondents expect costs to increase by below 10 percent.
Moreso, 20 percent of respondents expect costs to increase by above 20 percent.
In an interview, CoMZ president Colin Chibafa said: “The key challenges we are facing are around availability of foreign currency as we are surrendering 40 percent to the Reserve Bank so the 60 percent we are retaining is insufficient to meet our requirements.
“The second key challenge that we have seen is around power supply, availability and also recently the cost. Most miners as you have seen from the report we are experiencing at least 6 to 12 hours of power outages.
“This is negatively impacting on the volume that we are able to produce as miners and also the cost of doing business.
“The current cost tariff that Zesa has announced, which has seen a 42 percent increase in the cost of power, is unaffordable for mining companies as we cannot pass that cost onto our customers.
“Our customers are the ones who in fact set the prices for the goods that we sell,” he said.
In his presentation earlier at the presentation of the report on the state of the mining industry, ZETDC acting managing director Engineer Howard Choga said: As we talk to the USc12,21/kWh which is just the beginning, in fact I should be raising this with the Government.
“In the first place because we have been speaking this language that every time you talk about tariff increase, people always want to say Zesa should address their cost structure.
“But the situation was basically that we were importing at a weighted average cost of about USc11/kWh and then we would sell at between USc6/kWh and USc8 /kWh.
“So, when you speak numbers you then get to understand better exactly where we stand.
“This is the context in which we find the most important input into the mining industry and the way it is challenged, so I would say let’s accept the tariff of USc12,21/kWh and above for us to have a better future and supply the mining industry and respective industries.”
In his response to questions from the floor, Eng Choga said Zesa has also spearheaded and assisted in the restructuring of the electricity consumption market through facilitating the formation of the Intensive Energy User Group with the objective to ensure individual corporates are able to access the regional utilities to import their own electricity.
“As we speak today, I should say the Intensive Energy User Group has been licenced with all approvals from the Government and the Reserve Bank to the extent that any individual miner here, is able to go into the region and look for their own electricity, then they will come back
and tell us that our price is expensive,” he said.
