Energy policies strangle Zimbabwe’s electricity authority

Aug 06, 2006 02:00 AM

Power outages that have crippled industry are set to continue as the under-performing Zimbabwe Electricity Supply Authority (ZESA) Holdings is failing to attract private investors due to the country's strict energy laws and policies, says the power utility's former CEO.
Addressing delegates at the just-ended Confederation of Zimbabwe Industries (CZI) congress Simbarashe Mangwengwende said that attempts to lure investors would be fruitless as investors will continue shying away from the energy sector due to the electricity laws and policies that inhibit investors to make money on a sustainable basis.

Mangwengwende said that continued government monopoly on the pricing of electricity tariffs has run down the energy sector, a situation that has led ZESA record losses annually from 2002. Mangwengwende said government should repeal tariff controls in Section 35 of the Electricity Act of 2002 which gives the Minister powers to control tariffs.
"The energy insecurity in Zimbabwe is rooted in misconceptions that have led to, first and foremost, a problem of inappropriate regulation and secondly a problem of the resultant over-dependence on public sector investment in the energy sector," Mangwengwende said.

"We have a problem of regulation in that we have inadequately or inconsistently applied energy laws that make it difficult for investors to make money on a sustainable basis and for customers to obtain reliable and least-cost energy products and services."
"If the government is not able to make a profit when it has a virtual monopoly in the energy industry and controls the pricing," Mangwengwende asked, "what chance would a private sector investor without the same advantages have?"
He said that government only needs to establish and maintain a business friendly energy regulatory framework and the country will immediately benefit through the profitable operations of its existing companies and inevitable entry of new investors.

Government through the Ministry of Energy and Power Development as well as the Reserve Bank of Zimbabwe has lowered proposed ZESA tariff increases arguing that they would fuel inflation. But Mangwengwende dismissed the arguments by the government noting that power outages are more inflationary than the high cost of electricity.
"Finally, it is important to reiterate the fact that money to ensure energy security is not inflationary. What is inflationary is the high cost associated with energy supply disruptions," Mangwengwende said.

ZESA is failing to lure investors to inject capital in the development of power stations to increase electricity supplies and ease the frequent power cuts that have adversely affected both the industry and domestic consumers. Russian, Chinese and Iranian investors are in talks with the government on the establishment of power stations to increase electricity generation.
In June former ZESA executive chairman Sydney Gata travelled with the Vice President Joice Mujuru on a week-long investment drive to attract fresh capitalfrom the Far East and investment in the energy sector. But nothing so far has materialised.

Source: Zimbabwe Standard
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