ROBBING PAUL TO PAY PETER – ZESCO TARRIF EMERGENCY ADJUSTMENT
Immediately after the High and Mighty pronounced that Zesco tariffs will be increased, ERB immediately obliged and approved Zesco re-submission of emergency tariff increament.
In the technical pricing term, this is what is called “cross price subsidization across segments”. In a layman’s language, it simply means giving relief to the lower segment and transferring the costs to the higher segments.
The implication is that those using pressing irons, geysers, stoves, and any form of heating equipment will breach the 200 KhW and will bear the costs for lights only users. In addition, they will pay more than the current usage rate. Net impact at residential level is a further increase in the cost of living because they will now pay more for electricity come November 1. Remember that in 2025 budget no credit exemption relief was provided on PAYE. So be ready to spend more.
As for businesses it’s a direct hit as you simply have to absorb the 115% tarrif increment regardless of what technical term used such incremental or whatever. Implication is that businesses have to adjust their prices upwards to recover these additional costs.
Sadly, the price adjustment by business will be passed on to the consumer, including the lower segment using below 200 khw per month. So, the reality is that the perceived benefit for the lower segment will be wiped out through increased prices. So it’s a vicious circle. The real impact of this measure will be felt right through the whole economy. It sounds great on paper, but ultimately, there will be a direct transmission on the cost of living, which every Zambian will feel the consequences.
In essence, Zesco has increased tarrifs to import power at higher costs, which they do not have money for. So this cost has been passed to the consumer.
At a macro economic level, expect inflation to increase as prices increase. At the social impact level, expect the quality of living to deteriorate as consumers absorb higher prices of goods and services procured from the business community. End result more pain for Zambians.
It should also be noted that it is not clear whether this measure will result in more hours of power, or Zesco will maintain 3 hours, which is as good as staying in darkness for 24 hours.
A good example is how much more will Trade Kings pay in power consumption? Direct hit 115%. So by how much will they increase prices on their wide range of products consumed by literally everyone, including lower segment R1 and R2. The end result is that the 20% discount will be badly wiped out, so simply put, no relief has been given.
Fred M’membe
President of the Socialist Party