New tariff necessary, says Zesa boss
Sunday, 18 September 2011 11:52
Zimbabwe has experienced endless load shedding because Zesa is incapacitated
to produce adequate electricity. Standardbusiness reporter Ku-dzai
Chimhangwa (KC) spoke to Zesa group CEO Josh Chifamba (JC) on the problems
the utility is facing.
KC: Zesa has been accused of deliberately ignoring the manufacturing sector’s
concerns about the possibility of increased costs of production resulting
from the new tariff. What is your response to this?
JC: No we aren’t ignoring their concerns. In fact we are actually taking
their concerns into account.
Essentially this tariff is about ensuring that we sustain and even improve
the current supply.
Industry needs to understand that this tariff is to ensure that our system
is in such a healthy state such that it is able to convey the power
requirements that industry has.
Our network is almost collapsing. One thing industry is forgetting is that
when the tariff that we are now increasing was introduced in 2009, it was
simply a dollar denominated tariff, it had no relationship to our costs.
In 2010, the reason why we did not increase the tariffs was we took the very
considerations that industry has. This tariff increase should have been
introduced in January but its coming nine months late.
KC: What is the justification for the 31% tariff hike and will this
translate into less load shedding and better service delivery for consumers?
JC: We are not trying to raise money to establish new generation assets
through the new tariffs.
We’ve got two new building projects: Hwange units seven and eight and Kariba
South extension.
Funding for those is going to be sourced separately.
This tariff is essentially to raise money to address the issue of the
backlog in maintenance, which has resulted in a seriously degraded network.
Some of the load shedding that you are experiencing is not necessarily
coming as a result of shortage of power generation.
Some of it is as a result of the local networks where you reside. There are
bushes and trees encroaching into those lines, poles leaning over are
attacked by termites and we cannot replace them because there is no cash.
The focus is on maintenance; we have to rehabilitate the network.
For instance, we recently upgraded the whole switchboard at City Intake (in
Harare), that board was literally rotten. If that board had folded we would
have had serious blackouts in Harare.
KC: What key issues have served to stifle Zesa’s power generation capacity?
JC: The reason why we have this power generation deficit, and by the way, it’s
a situation common in the region, is because there has not been any
investment in generation assets. The last time in Zimbabwe when we put up a
power station was in the 80s (Hwange Power station).
At some of the stations we are running now, the thermals are more than 40
years old.
The primary reason why there was no investment was because the tariffs
themselves were not sufficient to make these projects bankable.
KC: How much power is the country importing from neighbouring countries?
JC: 150 megawatts from HCB. We’ve got a contract with SNELL (DRC) for 50
megawatts although that has not been very reliable, 200 megawatts from
Zambia only during standard times; at peak times we do not get anything from
Zambia.
Three weeks ago we were really tight on the supply side. We were importing
peak power from South Africa at 45 cents per unit and selling at 7,5 cents
per unit, but we had to do so to keep industry going.
KC: Considering the absence of an accurate billing system made possible by
meters, how credible is the amount (US$460 million) that Zesa says it is
owed by domestic consumers since it relied on estimates in the past?
JC: An audit was done to verify that debt. We intend to sell the debt at a
discount to interested investors.
A pre-condition for that is the investors would want to ensure that there is
no litigation on the debt.
Next month we will be sending statements to electricity consumers detailing
all the transactions from March 2009. We believe the debt is authentic and
if there is any error it will be very marginal.
KC: Do you think that the time is ripe for new players to enter the power
supply market?
JC: No, it’s probably not right. You can only attract private sector
participation if you’ve got the right prices. No private player will come in
now when the tariffs are low.
KC: What key issues would you attribute Zesa’s latest US$100 million loss
to?
JC: This year we were supposed to have a tariff coming in January and its
only coming in September.
If you look at our current budgets, there will always be a variance in that
the tariff did come in January 2011.
Also, I will confess that we are not efficient in all respects and the fact
that we do not have resources. We now have people, actually overheads,
simply sitting, they are not working, that’s why we need this tariff, yes.
WHO IS ENGINEER JOSH CHIFAMBA
Born in Highfield, Harare, he went to Zambia to join the war with Zipra.
Then he went to study in Bulgaria, returning to Zimbabwe to work at Hwange
Power Station in 1983 before going for further training in the United
Kingdom (East Midlands Electricity Board.)
When he came back, he was posted to Matabeleland as district engineer, rose
though the ranks to become area manager and then director of consumer
services.
Eng Chifamba left the organisation in 2001 after restructuring. “I did some
consultancy then moved to Lesotho on World Bank management contracts where
we faced the same challenges Zimbabwe is facing now.
“We introduced a prepaid system there and today it is profitable. I then
came back and am committed to turning the fortunes of the company”, he said.