The notion that Zambia’s 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 was reacting to a spate of recent articles 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 would 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 concluded: “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: the power deficit in Zambia goes beyond the sole issue of tariffs, and also includes other factors such as regulation, competition and the operational efficiency of ZESCO.”
Acting Chief Executive Officer
Zambia Chamber of Mines