Zesco tariff hike will close dairy farmers’ businesses, warns DAZ

Zesco’s plan to adjust electricity tariffs upwards would force more dairy farmers out of business because the cost of production will drastically increase, the Diary Association of Zambia (DAZ) has warned.

Zesco has proposed to hike electricity tariffs for all consumer categories effective at a date to be confirmed by the Energy Regulation Board (ERB) this year.

According to a revised schedule, the power utility applied to the ERB for an upward revision of tariffs for all consumer categories in an effort to ensure they are cost reflective.

Part of Zesco’s proposal includes a hiked tariff for metered residential customers who may pay K0.47 per kWh from K0.15 per kWh in the R1 consumption bracket of up to 100kWh, while consumers above 301kWh will be hit with a proposed tariff of K1.94 per kWh, up from K0.89 per kWh.

On the commercial side, Zesco wants consumers in the C1 bracket who consume up to 200kWh to now pay K1.07 per kWh, up from the current K0.54 per kWh, while consumers in the C2 bracket of above 200kWh will be faced with a daunting tariff of K1.85 per kWh compared to the current K0.54 per kWh.

Three other customer categories, which include social services and bulk distribution, also face huge increases by the power utility should the ERB approve their application.

But commenting on the development, DAZ chief executive officer Jeremiah Kasalu said the electricity tariff increment will push more dairy farmers out of business because they will be hit with a drastically increased cost of production.

He explained that dairy farmers are already under pressure to sustain their businesses with the existing high cost of production.
“Dairy products are perishable products so they need electricity and if electricity goes up, a lot of other things go up. For example, we use a lot of maize bran, cake. As we speak, I know of some farmers who’ve left the business of dairy last year because of the high cost of production that it became unprofitable. So, for small-scale farmers, I can see the number of farmers beginning to fail to manage their farms, downsizing, but some of them will actually exit the business,” Kasalu said in an interview.

“We depend heavily on electricity; the milk collection centres depend on electricity to cool the milk; the processors depend on electricity to cool the milk and process the product. But for sure, the adjustment in terms of price by the processors, won’t match the tariff increase is so we can foresee a situation where we risk our industry closing and creating a lot of unemployment.”

He advised government to engage dairy farmers on the proposed increment to avoid exacerbating hardships.

“So, government needs to be very careful and need to engage us; they need to consult us so that we can demonstrate to them what our fears are. They (government) do consult us, but on this one (proposed tariff increment), they haven’t consulted us,” he said.

And Kasalu appealed to government to improve regulation of imported dairy products into the country as cheaper foreign goods put local producers at a disadvantage.

“If we are not considered for exemption of some sort, it will be important for government to improve on the regulation of imports; we need to keep most of these imported products out so that we have a situation where our products are not unnecessarily fetched against cheap products,” said Kasalu.

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