The World Bank, which has in the past been accused of prescribing “suicidal economic policies” for third world countries, says Zambia should increase its low electricity tariffs to profitably run the power utility.
Zambia currently charges about three cents per kilowatt.
During the presentation of findings of the Africa Infrastructure Country Diagnostic (AICD) report for Zambia, World Bank representative Vivien Foster is quoted saying that despite Zambia’s strong economic growth, infrastructure’s contribution had been relatively low. “Infrastructure has the potential to contribute more to Zambia’s economy than in the past,” she said.
“The study which was conducted in 24 countries in sub-Saharan Africa shows that the poor state of infrastructure in these countries – its electricity, water, roads and information and communication technology (ICT) – cuts economic growth by two percentage points every year and reduces business productivity by as much as 40 per cent.” Over US $93 billion is needed annually over the next decade to address the continent’s current power supply crisis that is hindering Africa’s growth, she said.
On Zambia’s power tariffs, Foster said they appeared in line with operating costs but were far from long run capital costs. “This is because hidden costs of power utilities are high due to under pricing by most African countries like Zambia,” she pointed out. “Zambia charges about three cents whilst other countries like Chad charge about 30 cents per kilowatt.”
Zambia, like other countries in southern Africa, has been hit by a power shortage and has been rationing electricity supply to the mining industry — the country’s economic lifeblood. Foster then said for Zambia to be able to run profitably, it would have to increase its electricity tariffs to business levels which would allow it to make some profits for re-investments, if necessary.