The notion that Zambia’s mines are being subsidised by domestic consumers is “wholly untrue and completely at odds with the facts”, states Zambian Chamber of Mines president Nathan Chishimba, in response to a number of recent articles in the Zambian media suggesting that government and domestic electricity users are subsidising the power consumption needs of the mining industry.
These articles contend that the alleged subsidies are to blame for Zambian State-owned power utility Zesco’s long- term failure to invest in power infrastructure and additional generation capacity.
“This argument is demonstrably false and is very easy to refute,” Chishimba states.
He notes that, according to figures presented by Zesco at the 2017 Zambian International Mining and Energy conference and exhibition, which was held in Lusaka, in June, the mining industry accounts for 80% of the company’s revenues, with the balance coming 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,” Chishimba says.
He points out that, in fact, the mining industry’s contribution to Zesco’s revenues (80%) is proportionately much larger than its consumption (55%) of national energy production. “This is certainly not indicative of an industry that is being subsidised – indeed, the opposite would seem to be true.”
Chishimba remarks that it is misleading to compare tariffs for residential consumers with those for industrial users, such as mines, as the cost of supplying power to these users is not the same.
“It is vastly cheaper to supply power to heavy industrial users 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,” he states.
Chishimba comments that this is a global phenomenon that can be verified from available statistics. For example, he notes that, in the European Union, average industrial power tariffs are 44% lower than household tariffs, while, in the US, they are 43% lower.
“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. The power deficit in Zambia goes beyond the sole issue of tariffs, and includes other factors, such as regulation, competition and the operational efficiency of Zesco,” he concludes.