Planned new ZESCO tariffs to kill steel industry

Thu, 13 Apr 2017 10:55:19 +0000

By BENNIE MUNDANDO

THE steel sector will collapse if Energy Regulation Board (ERB) approves Zesco’s proposed 75 percent tariff hike, says Zambia Metal Recycling Association (ZAMRA) president Jimmy Luo.

Mr Luo said the situation, apart from pushing up the cost of production, would become a big challenge because steel products were already expensive compared to those manufactured by the Chinese.

He told the Daily Nation yesterday that the local steel sector was grappling with the market as it was one of the most neglected in Zambia because government had failed to protect it from
competition from outside
Zambia.

Mr. Luo noted that while
Zambain companies were selling a tonne of steel at US$650, some companies from countries like China were exporting the commodity to Zambia at US$ 400 due to reduced cost of production, thereby creating an unfair competition.

He noted that due to limitation in business for steel in Zambia, most local companies were already grappling with lack of market because their products could not compete with foreign products due to high production costs.

“If government went ahead and increased electricity tariffs, that would be the end of local steel businesses,” he said

He said there was need for Zambia not to weigh its options solely on the part of power generation and investments in the energy sector but also to have an eye on the economic effect of such an exorbitant increment.

He said the Mine workers Union of Zambia (MUZ’s) observation that the workforce in Zambia, especially in the private sector, would suffer if such an adjustment was effected was real.

“We totally agree with MUZ’s concerns over this proposed adjustment because we will simply close our businesses if that happened, “Our prices for steel are already high because we are producing at a very high cost as compared to steel that is coming from China. If electricity tariffs are to be increased further, it means we will end up charging almost twice what our counterparts are offering,” he said

He was aware that this adjustment was meant to make Zesco effective and to attract investments in the sector to reduce load shedding.

But government should not limit itself to that sector alone but look at aggregate performance of all sectors.

“ What will benefit Zambians if load shedding ends but companies close? This issue should be considered from a broader perspective and not limited to the operations of Zesco alone,” Mr. Luo said.

He warned of the impending civil unrest among employees in all sectors should ERB bulldoze its way and approve the proposed adjustment saying such a move was bound to boomerang should a haphazard decision be made in the name if making Zesco viable.

“If electricity tariffs are increased, the cost of nearly all the products in the economy will rise and once that happens, no worker will be content with what they are getting currently because they will need more disposable income to cope with the rise in prices but who will give them increased salaries if companies also start producing at a very high cost?