Rupiah is leading Zambia on a path of economic disaster – Nawakwi

Rupiah is leading Zambia on a path of economic disaster – Nawakwi
Written by Patson Chilemba and Nchima Nchito Jr
Wednesday, July 22, 2009 2:10:59 AM

FDD president Edith Nawakwi yesterday charged that President Rupiah Banda is leading the nation on a path towards economic disaster as a result of his government's reckless hike in electricity tariffs by 35 per cent.

And economic consultant Professor Oliver Saasa has warned that the 35 per cent increment revised electricity tariffs on residential use by Zesco might lead to an increase in poverty levels.

Commenting on the Energy Regulation Board (ERB) who on Monday approved an average of 35 per cent electricity tariff increase for Zesco with effect from August 1, 2009, Nawakwi said the increase in tariffs was heightened after President Banda made a public pronouncement in support of the hike.

She said it was completely premature and reckless for the President to have come out in support of the hike.

"It was premature and ill-timed for the President to come out in support of the increase in energy. If you go to court over a national issue, you can't speak as a President. They have proceeded to increase because in effect, President Banda said 'increase'. But that increase will not induce any investment in the electricity sector. It will just be spent on supporting the top heavy at Zesco," Nawakwi said.

"This is completely reckless behaviour, he [President Banda] needs to explain where he is leading this country to. But it is not on a path to economic growth. It is a path to economic disaster."

Nawakwi said as a result of the hike, deforestation would increase in that more people would resort to using charcoal as an alternative. She said it was sad that while governments in other countries were providing stimulus packages, leaders in this country were increasing electricity tariffs, which should be used as a stimulus.

Nawakwi said President Banda's government had come to kill the little of what was left of Zambia's economy.

"It is completely misguided. Energy is to an economy what blood is to the body. This government wants to suck the little blood left. This economy is in intensive care and we need a lot of support from government. The cost of production has skyrocketed because energy is expensive and labour is ill-motivated. On the other hand you are saying you can't pay nurses because of the global recession but on the other hand you increase electricity tariffs," Nawakwi said.

"This economy is going to shrink. I would have accepted it if it was another person in State House, but it is an economist like me who has done this. We should not pander to the World Bank demands but go to them with our solutions. This is something that could easily be done by floating shares on the Lusaka Stock Exchange. NAPSA should buy shares in Zesco instead of talking about lotto. All the local pension houses can be requested to assist Zesco by buying shares in Zesco."

Nawakwi said it was risky to increase tariffs in the midst of a recession.

"For us who are in farming, we shall reduce the hectarage. If I was spending six per cent on electricity, that increment will now push it to 10 per cent, meaning I will reduce on the hectares," Nawakwi said.

Nawakwi said the same government had allowed National Milling Corporation Limited to import wheat, when the local farmers had failed to sell their produce for two years in the running.

ERB awarded the increment in two phases. During the first phase, between 2009 and 2010, there will be an increment of 35 per cent effective August 1. The second phase of 2010 to 2011 would see a further increment of 26 per cent.

And in an interview, Prof Saasa said the current economic circumstances had to be taken into consideration.

"The effects of this increment on the poor will be quite significant. With the revised tariffs most people would have to pay more than they can budget for," he said. "This will mean that expenditure in other products will also have to be reduced in most home budgets to accommodate the tariff hikes."

Prof Saasa cautioned that there were also other hidden costs to the revised electricity tariffs.

"The majority of people will be forced to cut down on their consumption of electricity turning to charcoal as an alternative source of energy. With this happening it will have an adverse effect on our forest conservation plans as there will be a hike in the demand for charcoal," he said.

Prof Saasa said while bringing economic gains to Zesco, this would greatly compromise conservation efforts.

However, he commended Zesco for introducing the revised electricity tariffs in two phases as this would reduce shocks in the economy.

And Zambia Chamber of Small and Medium Business Association (ZCSMBA) called for an improvement on the services offered by Zesco.

Organisation president Maxwell Sichula said the increment was expected.

"It is understood that the sector has to be made more attractive if it is to attract more investments though the cost of business will also go up," said Sichula. "However, with this increase in tariff we expect that there shall be improvements in the operations of Zesco."

Sichula said as things stood, Zesco provided services that where below standards.

"Our people are suffering with the erratic supply of power that we are currently experiencing in the country. Should Zesco fail to account for the increased revenues they will have from the revised tariffs, we expect that heads will roll," he said.

Asked on the fact that with revised tariffs commercial power users would pay less than residential users per kilo watt hour, Sichula said this might have been done to encourage the industrial sector.

"...We all know that for the economy to grow, we need to encourage the industrial sector. This might have been the motive behind the pricing," said Sichula.