Power Deficit in Zambia Caused by ZESCO’s Inefficiencies – Chamber of Mines

Zesco Head Offices in Lusaka

The notion that Zambia’s Copper mines are being subsidised by domestic consumers is “wholly untrue and completely at odds with the facts”, Chamber of Mines president, Nathan Chishimba, said today. Chishimba said that “Claims that the mines are being subsidised have the unfortunate effect of portraying the mining industry as being responsible for Zambia’s power deficit and ZESCO’s precarious financial situation. This is simplistic approach, the power deficit in Zambia goes beyond the sole issue of tariffs, but also includes other factors such as the operational efficiency of ZESCO, regulation and competition [Zesco’s Monopoly].

Chishimba was reacting to recent reports in the Zambian media suggesting that the government and domestic electricity users are subsidising the power consumption needs of the mining industry, and that these subsidies are to blame for ZESCO’s long-term failure to invest in power infrastructure and additional generation capacity.

“This argument is demonstrably false, at odds with the facts and very easy to refute,” said Chishimba. “According to figures by ZESCO presented at the June 2017 ZIMEC conference in Lusaka, the mining industry accounts for 80% of the company’s revenues; the balance comes from households, government and services, general industry and agriculture. How is it possible for these far smaller revenue contributors to be subsidising the major contributor? It makes no sense.”

In fact, the mining industry’s contribution to Zesco’s revenues (80%) is proportionately much larger than its consumption (55%) of national energy production, Chishimba said. “This is certainly not indicative of an industry that is being subsidised – indeed the opposite seem to be true.”

Chishimba said it is misleading to compare tariffs for residential consumers to those of industrial users like mines, because the cost of supplying power to each is not the same.
“It is vastly cheaper to supply power to heavy industrial users like mines, because they consume it in bulk and at high voltage. Residential customers, on the other hand, consume low-voltage electricity that requires an extensive and expensive network of distribution lines, substations and transformers.”

This is a global phenomenon that anyone can verify from available statistics, Chishimba said. In the European Union, for example, average industrial power tariffs are 44% lower than household tariffs; in the United States, they are 43% lower. Chishimba however did not address the issue raised by CEC that the current Mine tariffs were not cost reflective and therefore unattractive to new investments in power generation.

However, ZBT analysts review clearly indicates that Zambia needs to diversify its energy sources from its over reliance on Hydro which came under stress from climate change impact of low rainfall. The Tarrifs such as the erstwhile 6cents per Kilowatt hour simply falls below new and diversified sources of energy power generation market and cost reflective tarrifs.

ZBT has since sent a press query to the Chamber of mines to address this question of cost reflective tarrifs. Sources from both Zesco and CEC has told ZBT that these same Mines that are refusing to pay the revised tariffs in Zambia are paying almost double to triple the revised tarrifs in other countries were they have operations, exposing their double standards and unfair play.