• The country cannot wait for a period of 5 years for the tariff to become cost reflective.
• There is need to increase the tariffs quite significantly within the next 1 year to actualize investment.
• Investors have to be assured of a reasonable return on investment.
An Energy Expert has proposed a 17% increase in electricity tariffs per year for the next 5 years, which will translate to 3.4 percent annually to make the tariff cost reflective and attract investments in the energy sector.
Addressing Journalists on the state of the Energy Security in Zambia, Dr. Johnstone Chikwanda argued that the country cannot wait for a period of 5 years for the tariff to become cost reflective as indicated in the electricity cost of service study recently presented to government.
Dr. Chikwanda stated that for any investor to consider investing in the energy sector, they have to be assured of a reasonable return on investment, hence the need for a significant increase in electricity tariffs within the next one year.
“Until the issue of the tariff is resolved and acted upon, it will be very difficult for any leadership to actualize private sector investment pledges in the energy sector and end load shedding in a sustainable way. And to achieve a realistic tariff, government requires our support. We need to take a bitter pill by allowing tariffs which will unlock investment to be implemented without tearing one another.”
“The electricity cost of service study which was recently presented to government has clearly indicated that to make the tariffs cost reflective we need to increase them by an average of 17% over a 5-year period. I hope the report meant to say an average of 17% per year for the next 5 years and not 17% over 5 years which translates to an average of 3.4% per year. As we are desperate for investment, we cannot wait for 5 years for the tariff to become cost reflective. I have reservations on some findings by the international consultant who was engaged,” Dr. Chikwanda stated.
He added that accelerating economic development will not be achieved and Zambia will make poor progress in the 8 Sustainable Development Goals which depend directly on energy and include decent jobs as well as poverty.
“There is need to increase the tariffs quite significantly within the next 1 year to actualize investment, failure to which it is predicted that load shedding will worsen and may reverse the gains which have been made in the economy,” he added.
Meanwhile, Dr. Chikwanda advised Zesco to consider importing power from neighboring Mozambique in order to reduce the load shedding hours further.
He said although this may come at an extra cost, it cannot be compared to the impact of not having electricity.
Dr. Chikwanda further observed that the recently signed Memorandum of Understanding and Joint Development Agreement between Zesco and Abu Dhabi Future Energy Company for the development of 2, 000 megawatts of solar power at US$2 billion, will enhance energy security in Zambia and the region as well as contribute to job creation as over 10,000 hectares of land will be needed and up to 10 million solar panels.
“This is mind blowing like the “Desert to Power” Sahel region solar project just below the Sahara Desert. The Investment will foster local sub-contractor linkages, entrench our greening agenda and traction on green pathways, position Zesco as an industry statesman capable of finding other means of powering the nation in a sustainable way which has not been the case before,” he observed.
He also called on President Hakainde Hichilema to focus on eliminating the bottlenecks on the business environment as well as regulated environments such as inadequate Return on Investment (ROI), and lengthy and cumbersome approval processes.
Dr. Chikwanda noted that these bottlenecks take a combined approval journey of at least 1 year before an investor can start importation of materials and subsequent construction.