The Post Zambia, August 02, 2010

CONSUMER Unity Trust Society (CUTS)-International has condemned ERB’s decision to hike electricity tariffs for Zesco Limited, saying it will have negative multiplier effects on the economy.

Last week, ERB authorised Zesco to hike electricity tariffs by 25.60 per cent despite the utility’s performance against the agreed Key Performance Indicator (KPI) being unsatisfactory.

In a press statement, CUTS-International acting coordinator Patrick Chengo stated that the newly approved electricity tariffs were too high and not commensurate with consumers’ disposable income, hence making the service more expensive and unaffordable to some.

“This is just at the backdrop of the fuel increments a few months ago. This hike will make the cost of doing business in Zambia high and might in the long run make the country struggle in achieving its economic diversification strategy,” he stated.

Chengo stated that the cost of production amongst the business community would increase and have an adverse effect on pricing of many products.

“Therefore, any hikes in electricity tariffs increase the cost base of any organisation or business, and this mostly compels them to also start factoring their pricing structures. Given Zesco’s monopolistic position (state), it’s time the company came up with an effective internal tariff adjustment model that will support economic growth and development with consumer interests at the apex of all this, “ he added. “The tariff hike which is three times above inflation rate seems to build policy inconsistencies especially at the time when the country has been trying to develop and revamp the economy. Much effects arising from this will be felt by the house hold consumers who are already spending more than what they can afford on basic needs.”

Chengo further urged the regulatory authority and Zesco to be considerate when structuring such kind of adjustments, especially for energy, which he noted was a key driver of any economic activity.

And CUTS-International executive board chairperson Ambassador Love Mtesa has stated that the purposeful and simultaneous increase on energy tariffs in the past seven months would have inflationary effects, especially the single digit inflation that the country was currently boasting of.

“The positive effects that have been seen from the fall in inflation from about 10 per cent to a single digit during the past few months will not be of any effect. It is like taking two steps forward and then suddenly five steps backwards. Already we have seen that cement, which was falling and even started retailing at K52, 000, has suddenly risen to K55,000, and it might even go up again,” stated Ambassador Mtesa.

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