The Sunday Mail
Livingstone Marufu
THE Zimbabwe Electricity Supply Authority is dangling a discounted USc4 tariff for mining companies during off-peak periods to relieve pressure on the national grid and help miners increase production.
Mining firms, which are among the major consumers of electricity, have been pressuring the power utility to reduce tariffs as they struggle with low commodity prices on international markets.
The Chamber of Mines of Zimbabwe is lobbying for electricity charges levied on miners to be cut to USc7 per kilowatt hour from current USc9/kWh during peak periods.
But Zesa wants miners to take advantage of even lower off-peak rates. Demand for electricity usually peaks between 6am and 10am, and 5pm and 8pm.
Zesa spokesperson Mr Fullard Gwasira told The Sunday Mail Business that the USc4 tariff was targeted mainly at large-scale miners.
“Since December 2015, (the Zimbabwe Electricity Distribution Company, a unit of Zesa) has managed to stabilise power supplies in the national power grid to maximise production of miners. Coupled with steady supplies of imports, those consumers did not encounter inconveniences associated with loss of production time. ZETDC has also intensified demand side management and energy efficiency measures for farmers and miners to contain their tariffs.
“Large-scale miners having been given the option of time of use tariff where they are charged USc4 per kilowatt hour during off-peak times and all categories of miners are still at an average peak tariff of USc9,06 per kilowatt hour,” said Mr Gwasira.
Dedicated power supplies
Though the USc4 tariff is considered attractive, the Chamber of Mines says mines prefer expensive dedicated power lines — charged at US14c — since they are reliable.
Chamber of Mines economist Mr Pardon Chitsuro said last week dedicated lines effectively made mining houses immune to load shedding.
“Some large miners are using that rate of USc4 per kilowatt hour, which is very cheap and encouraging to boost their production levels. However, most mines usually prefer dedicated lines of power supply which are close to USc13 per kilowatt hour as they are always available.
“Dedicated lines are always preferred in the mining sector as far as power supply is concerned; even when there are power shortages they won’t suffer the effects load shedding as they are exempted due to the higher tariffs they pay,” explained Mr Chitsuro.
The mining sector requires about 120MW to operate viably. But should planned US$3,8 billion investment in mining be achieved by 2020, demand will soar to 210MW.
Power shortages have been weighing on production.
Metallon Corporation’s production update for the quarter ended June 30, 2016, showed that Zimbabwe’s biggest producer of the yellow metal lost 112 hours of production, which equates to 48kg of gold or 1 700 ounces.
The company reportedly lost more than 169kg of gold (5 975oz) in the first half of the year.
Lobbying for tariff reductions by mining companies is not peculiar to Zimbabwe and has become common in other resource-rich countries reeling from falling commodity prices.
The National Regulatory Authority of South Africa last year approved a 9,4 percent increase in tariffs for 2016 to 2017 despite spirited efforts by miners to discourage the move. On January 1, 2016, Zambia’s government increased tariffs for mining companies to USc10/kWh.
But increases for commercial and industrial customers were reversed on February 6. Zambia imports electricity at USc19/kWh.
Before the increase, Zambian mining companies had filed a lawsuit against the proposed increases and the case is before the Lusaka High Court.
Zambian mines consume about half of the country’s power output. The country has capacity to generate more than 2 200MW.
Like Zambia, Zimbabwe imports power to meet demand.
With a decline in output at Kariba South Hydro Power Station, which has for long been the country’s workhorse producing 750MW, the Zimbabwe Power Company, another Zesa unit, has been buying electricity from South Africa’s Eskom and Mozambique’s HCB.
Price headaches
Miners point to subdued commodity prices as their main reason for opposing tariff hikes.
The prices of many commodities bottomed out this year as growth in China, the world’s biggest consumer of minerals, slowed.
Market watchers are generally cautious of prices going forward.
But commodity prices are no longer moving in concert as most metal prices are now reacting differently to demand and supply forces. For example, platinum and gold prices have been showing signs of recovery relative to other minerals.
At the beginning of the year, the Chamber of Mines of Zimbabwe had projected mineral revenues would drop by US$50 million to US$1,8 billion in 2016 from US$1,85 billion realised in 2015.
