adminThis came out of a stakeholder workshop held in Vumba on Wednesday on the socio-economic effects of pricing of public utilities, hosted by the CTC in conjunction with the World Bank. CTC chairman Mr Dumisani Sibanda said utility charges were having a negative impact on individuals’ incomes.
“Utility charges are too high, and there is need to harmonise all the utility charges into the average income level. At present, both domestic and commercial consumers cannot settle all commitments concurrently. Utilities should peg their charges to the level of liquidity available in the economy,” he said.
Zimbabwe’s trend where imports continue to exceed exports, with the 2011 ratio projected to be around 69 percent, means the country’s liquidity ratio could be on the decline, which is compromising consumers’ capacity to pay utility bills.
A recent analytical assessment report on the socio-economic impact of charges for utilities by the CTC shows that the current capacity of utility providers is below par, which means their charges should be pegged considerably lower.
The report shows that in the past two years, when the US$9 billion GDP level has not been achieved, utilities’ fixed costs – mainly human resources – have not been rationalised in tandem with the level of services provided, yet their tariff structures still carry a full cost load.
“Tariffs should reflect the level of service provision, which can be supported by wealth creation as represented by GDP. Tariffs could be discounted to the level of GDP, that is to say in 2009 by 30 percent, in 2010 by 20 percent and 2011 by 10 percent.
“This could further be moderated to reflect the context of insufficient liquidity in the market,” said Mr Sibanda.
A case in point of a parastatal that should reduce charges, cited by the CTC, was that of Zesa Holdings. It effected a tariff increase in the last quarter of 2011 despite an unrecoverable debtors book that would compel a reduction of tariffs to a level in line with the extent of economic recovery.
Another major bone of contention is that the majority of utilities’ pricing models are inefficient as a significant portion of their revenue is going into wages.
The CTC has noted that salaries in commercial parastatals have been higher than other sectors from the onset of dollarisation. It has also been shown that the gap between the minimum cost of living and salaries in commercial parastatals is the narrowest among the sectors.
Speaking at the workshop, Secretary for Economic Research and Policy in the Office of the President and Cabinet Mr Ozias Hove said his department will closely supervise the implementation of stakeholders’ recommendations on improving the performance of public utilities, with a special focus on suggestions by the World Bank.
World Bank lead operations officer Dr Peter Nicholas gave a critique of international competition law and proposed alternative modes for competition commissions.
Dr Nicholas suggested that Zimbabwe could strengthen the CTC by considering options such as consolidating the commission and the respective regulatory agencies under one body. This would give the CTC veto power over regulators/Cabinet ranking so that it can have direct appeal to the highest echelons of Government, or power to issue binding directives.
Although playing a critical role in investigating and advising on anti-trust tendencies, the CTC is largely viewed as a toothless bulldog.
Online Reporter