Zambia's Power Crisis: A Call for Urgent Reform and Cost-Reflective Tariffs

As Zambia grapples with a severe power crisis, business leaders and economists are calling for immediate action to prevent economic collapse and stimulate growth. Two prominent voices in this debate, Diego Casilli, Chairperson of the Business Coalition Taskforce, and Economist Mutisunge Zulu, offer compelling insights into the challenges and potential solutions following Zambia’s Minister of Energy recent announcement post the reintroduction of Maamba Collieries power plant 300MW into the ZESCO limited grid after scheduled annual maintenance.

The Business Perspective: A National Crisis

Diego Casilli, a businessman with 34 years of experience in Zambia, paints a dire picture of the current situation. He describes the ongoing load shedding as "impossible" for businesses to operate under, warning of imminent closures and job losses if swift action isn't taken. 

Key points from Casilli's argument include:

1.      Unsustainable Costs: With diesel power at 38 cents per unit, businesses are struggling to maintain operations using standby generators.

2.      Economic Downturn: Casilli predicts negative growth when factoring in population increase.

3.      Urgent Solution Needed: He proposes pricing power for businesses at import costs, estimating emergency power rates at 12-14 cents per unit.

4.      Call for Flexible Distribution: Casilli advocates for overcoming limitations on direct lines to consumers.

5.      Warning of Fiscal Impact: As businesses close or downsize, he cautions that tax revenues will decline, further exacerbating the economic crisis.

The Economist's View: Reform and Transparency

Economist Mutisunge Zulu offers a more structural perspective on the crisis, focusing on long-term solutions and the need for transparency in the energy sector. His key points include:

1.    Cost-Reflective Tariffs: Zulu argues that meaningful reform in the energy sector is impossible without adjusting tariffs to reflect true costs.

2.    Alignment with ZESCO's Plan: He questions whether the process to make ZESCO's tariffs cost-reflective by 2027 can be accelerated.

3.    Deficit Reduction: Zulu notes that implementing cost-reflective tariffs could narrow the power deficit to 512MW, providing some relief to the current situation.

4.    Transparency from ZESCO: He calls for ZESCO to be more transparent about its progress on implementing recommendations from the cost-of-service study, particularly regarding operational efficiency and human capital costs.

The Path Forward: Balancing Immediate Needs and Long-Term Sustainability

Both Casilli and Zulu agree that the current situation is untenable and requires immediate action. Their perspectives, while coming from different angles, converge on several key points:

1.    Urgent Need for Reform: Both recognize that the status quo cannot continue and that significant changes are necessary to address the power crisis.

2.    Cost-Reflective Pricing: There's agreement that power pricing needs to more accurately reflect the true cost of production and distribution.

3.    Economic Impact: Both voices emphasize the severe economic consequences of inaction, from business closures to reduced tax revenues.

4.    Long-Term Vision: While addressing immediate needs, both Casilli and Zulu stress the importance of considering long-term sustainability in the energy sector.

Conclusion

Zambia's power crisis represents a critical juncture for the nation's economy. The perspectives of business leaders like Diego Casilli and economists like Mutisunge Zulu highlight the urgency of the situation and the need for a multi-faceted approach. 

As the country grapples with this challenge, it's clear that any solution must balance the immediate needs of businesses with long-term sustainability goals. This will likely involve a combination of cost-reflective tariffs, increased transparency from ZESCO, and strategic investments in power generation and distribution infrastructure.

The coming weeks and months will be crucial in determining Zambia's economic trajectory. With thoughtful reform and decisive action, there's hope that the nation can not only overcome this crisis but emerge with a more robust and sustainable energy sector.