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Thursday, 5 July 2012

Energy Watch (Electricty Tariffs)

Government recently announced that it will gradually raise the electricity tariffs it charges mining firms so that by 2015 they reflect the true cost of producing power : "We would like to see a situation where all the mines pay cost-reflective tariffs and we want to see this migration by 2015". No more subsidies. The tragedy of Zambia is that mining companies are actually subsidised in Zambia. Especially, if you consider the environmental damaged. The external cost of mining in Zambia means that taken together - we are subsidising pollution and externalisation of large profits to Swiss accounts.

8 comments:

  1. Why has the state allowed this neo-colonialist plunder to occur? Quite simple: the "Big Men' trousered fortunes, and will continue to do so. The fact that the PF government - one based on supposedly Christian principles, has refused a petition from the Zambia Council of Churches on issues of mining socio-economic equitability - in contravention of its own manifesto, tells a sorry tale. Zambia gets nothing from its mines except massive pollution, destruction and sick people. We have a massive open-pit mining operation planned for the Lower Zambezi National Park, and others planned for the Chiawa Community Park next door, and others upstream such as uranium mines and the like. The result of all this nationally is a rising kwacha and the flourishing of the Dutch disease that kills agriculture and manufacturing - the source of jobs.

    An ominous development - ignored by the media, is the PF's decision to set up its own trading companies and to invite investors to join forces with them. Of course, they will enter into joint mining businesses with such as Glencore. This is madness. The corruption to flow from this will drive home the nails.

    ReplyDelete
    Replies
    1. I dont know why PF govt acts in this way
      Either they don’t want to scare investors and rely on foreign mining companies to create jobs and so they don’t care about their looting in order not to antagonize them
      or they pretend to fight corruption to make a lasting impression in front of donors and the Zambian People but they forget big shots and looters : they are rotten to the core like rupiah and his gang

      the central and eye-opening issue : why did sata remove Simuusa from mines ministry ?

      anyway they are very disappointing and the PF victory leaves a stale after-taste

      Delete
  2. Hi I.P.A Manning,

    The result of all this nationally is a rising kwacha and the flourishing of the Dutch disease that kills agriculture and manufacturing - the source of jobs.

    I would say demand is the source of jobs. Besides, why are people so scared of a strong Kwacha? What is the evidence that 'Dutch Disease' has ever occurred in Zambia?

    I think the term 'Dutch Disease' is used inappropriately. According to Wikipedia:

    In economics, the Dutch disease is a concept that explains the apparent relationship between the increase in exploitation of natural resources and a decline in the manufacturing sector. The mechanism is that an increase in revenues from natural resources (or inflows of foreign aid) will make a given nation's currency stronger compared to that of other nations (manifest in an exchange rate), resulting in the nation's other exports becoming more expensive for other countries to buy, making the manufacturing sector less competitive.

    Right now Zambia is exporting mainly raw materials anyway, so there is not much of a copper manufacturing industry that is going to be impacted from becoming uncompetitive because of a strong Kwacha.

    I think Zambia has a long way to go before the Kwacha becomes 'so strong' that it will impact the rest of the manufacturing sector more than the influx of cheaply made Chinese goods.

    Cho,

    Check this out. The World Bank says that Zambia's GDP is $19.2 billion.
    Of course they also say that unemployment is 14%.

    Is there any idea where they get these numbers? And if GDP is really $19.2 billion, the Zambian government should be at least receiving around $5 billion in taxes.

    ReplyDelete
  3. Businesses that already ended due to cheap imports- textiles, toothpaste, tyres. Businesses that are struggling due to over valued kwacha- cotton, tobacco, coffee, tourism, export flowers and veg.
    I always buy "made in Zambia" if I can. The strong kwacha often makes Kenyan washing powder cheaper than local or South African Jam cheaper than Rivonia. Why do we allow this? It exports jobs.

    ReplyDelete
  4. Hi R. Shelton,

    I was responding ot HPA Manning's point that "Dutch Disease" kills off both agriculture and manufacturing. You wrote:

    Businesses that already ended due to cheap imports- textiles, toothpaste, tyres. Businesses that are struggling due to over valued kwacha- cotton, tobacco, coffee, tourism, export flowers and veg.

    You're saying that a strong Kwacha would be good for the exporters of manufactured goods, and bad for raw materials exporters.

    In theory it would therefore make it more attractive to manufacture these raw materials into finished goods in Zambia too. At the same time a strong Kwacha would make it cheaper to import capital goods for manufacturing, as well as fuel.

    I always buy "made in Zambia" if I can. The strong kwacha often makes Kenyan washing powder cheaper than local or South African Jam cheaper than Rivonia. Why do we allow this? It exports jobs.

    I have always believed that buying locally produced goods and services has the greatest impact on both job creation and on economic stability, protecting the national economy from external shocks.

    There has to be a place for import substitution and protection of local producers. Certainly Japan, South Korea and even China have such protections in place, and no one is complaining that they are not participating in 'free trade'.

    ReplyDelete
    Replies
    1. MrK
      A strong kwacha hurts ALL exports including tourism. A strong kwacha favours imports. Imports create one or two jobs. Exports create thousands of jobs.

      Delete
  5. R. Henson,

    I agree that a strong Kwacha would marginally increase the cost of all exports, mainly labour costs. However, it would make the importation of capital goods much cheaper, which would help local manufacturers. Value addition would dwarf the increased cost of labour.

    And value addition would create more and higher paying jobs.

    ReplyDelete
    Replies
    1. MrK,
      I disagree.
      Capital goods such as equipment are imported once to set up and then used thereafter. The local costs are ongoing and should be much greater or we are in the wrong business. The businesses most hurt by a weak Kwacha are those importing all their inputs, processing and reselling. We should not actually have these as a priority. Our priority should be businesses adding value to local resources and products using local labour and then export some or all. Capital costs are a small part of these but they are seriously hurt by cheap imports.

      Delete

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