Zambia’s electricity price hike will ease power shortages that have put pressure on the economy of Africa’s No. 2 copper producer, the International Monetary Fund (IMF) said on Thursday.
Zambia’s economy is likely to grow by less than 5 percent in 2015 due to the power crunch, which has hit output at mining firms, already grappling with a slide in global copper prices, the government of the southern African nation has said.
Zambia’s energy regulator allowed state power utility, Zesco, to raise the average price of electricity to 10.35 U.S. cents per kilowatt hour (KWh) from 6 U.S. cents per KWh. The new tariff became effective on Thursday.
However, mining companies were unaffected by the increase because most of them get their power from Zambian power supplier Copperbelt Energy Corp. which buys electricity from Zesco in bulk and sells it to mining companies including the local units of Vedanta Resources and Glencore.
“Today’s increase in electricity tariffs is a key part of laying the foundation for needed investments in new power generation,” IMF country representative, Tobias Rasmussen, said.
“The move, on its own, does not ensure full cost recovery in electricity provision, but this is an important step towards putting the power sector on a sustainable footing and overcoming the electricity shortages that have plagued the economy.”