Zambia’s power utility company ZESCO today implemented an extra 25% tariff increase as development industry analysts say it will have disastrous consequences in the economy.
In May, ZESCO implemented a 50% price increase, after the Energy Regulation Board approved a two-phased tariff adjustment of 75%. The company says cost-reflective power rates will stimulate growth in the energy sector by making it attractive to investors. Analysts dismissed this argument, saying high power prices will be a blow for the economy.
“This will set off high prices of agricultural and other produce, including mealie-meal,” says an analyst with a leading bank who whished to remain anonymous. He says it will trigger job losses as production slowed due to a drop in demand. “This will defeat the whole purpose of increasing the tariff in the first place.”
The Millers Association of Zambia (MAZ) has in the past supported the argument that power price increases will harm the economy and warns that it will inflate the price of staples.
MAZ president Andrew Chintala says the decision will negatively impact the entire value chain of producing mealie-meal.
The concerns prompted frantic negotiations between the Zambia National Farmers’ Union and ZESCO on rates that will keep agriculture viable.
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