Finance Minister Mthuli Ncube has revealed is now amenable to an immediate power tariff increase, after being initially against the idea. This means that the government could end up increasing ZESA tariffs soon.
The Finance Minister said this during an event hosted by Newsday founder Trevor Ncube:
The power situation is very serious. In the short-term, we need to work on demand management strategies, where we categorise users and come up with a differentiated tariff system.
For instance, there is no reason why the mining sector should not pay a tariff linked to the exchange rate because they are major earners of foreign currency.
So, we have to look at the demand side, the supply and internal operations of Zesa. In the past, I was unhappy about an instant tariff increase, but having done all these things, I am more convinced now we can now increase the tariff.
If we are only having power during the night when we don’t need it, then it really doesn’t matter if the tariff goes up.
In terms of how much, I can’t say, but those simulations are being done and soon, we will have a new tariff. The power situation is very serious. In the short-term, we need to work on demand management strategies, where we categorise users and come up with a differentiated tariff system.
Expect a fuel price increase too
During the same event the Finance Minister also hinted on a fuel price increase.
The price of fuel is likely to go up, I think what will be ideal is the price of fuel is close to or equivalent to a US$1. That’s the ideal. If you look around the region, that’s the ideal.
So we will also get there, but we won’t get there in a big bang, it has to be gradual, not a big bang as long as we hold the exchange rate.
You will see the fuel price adjust to equilibrium one dollar. The reason for this subsidy to the economy is you are most aware that the arbitrage opportunities, that were there before, have crumbled.
According to the minister fuel prices should be around $1 USD. In other words he is pegging the price of fuel to the USD. The government has in the past criticised businesses for pegging prices against the USD.
From what he says expect the price of fuel to be around $9 per litre as the interbank rate has surged to this after the market was liberalised.