Electricity tariff hike imminent as Mthuli presents mid-term review


Finance and Economic Development minister Mthuli Ncube will today announce an electricity tariff review to improve the viability of the country’s power utility in a mid-term review which is expected to strike a balance between economic expectations and social protection.

The last tariff increase was done in 2011 to ZWL$0.986 per kilowatt hour. It was expensive when Zimbabwe had the multi-currency system.

Unsustainable tariffs and lack of investment in the capital intensive energy sector has seen the power utility struggling to meet domestic demand. This has seen rolling power cuts which have gone for up to 18   hours affecting the operations of industry and commerce.

Ncube is also expected to announce a package to cushion civil servants and pensioners amid rising inflation which has eroded the purchasing power of the local currency. The mid-term review is largely expected to give an update of the economy and to restate the 2019 budget which was initially in US$ but will now be recast to ZWL

This means that there will be new votes for Ministries and some new revenue measures.

By and large there will be an adjustment of the tax brackets while civil servants and pensioners will receive a cushioning allowance. The package to civil servants comes at a time inflation has spiked to 175.66 percent in June.

Pensioners are currently getting a  monthly payout of ZWL$80.

Analysts expect Ncube to have a clear budget on how much grain will be imported into the country and give an update on the preparations for 2019-2020 farming season in the absence of command agriculture.

In line with election promises, the Minister is also expected to announce progress and funds used on the devolution programme and to provide an update on the compensation of former farm owners.

Analysts also expect government to announce the repealing of the Indigenisation and Economic Empowerment Act which now only applies to diamond and platinum sectors.

The mid-term review comes at a time Ncube had told business there won’t be surprises on fiscal and monetary policies with focus now on making the local currency appreciate in value.

In February, the central bank abandoned the 1:1 parity between the bond note and the US dollar announcing an interbank market where the currencies would be traded.

In June, government abandoned the multi-currency regime that has been in place since 2009 and decreed that the Zimbabwean dollar should be the sole legal tender under Statutory Instrument 142 of 2019. These  pronouncements caught industry and business off guard.

Last week Ncube told captains of industry recently that the era of surprises is over as industry had been caught unawares by policy pronouncements.

“Let me reiterate that no major policies are expected but what is remaining is to consolidate these gains through fine tuning the foreign currency market to enhance its efficiency and reduce variations across banks and bureau de changes and licensing of more
foreign currency dealers and Bureau de Changes to enhance foreign currency mobilisation from the market. Once the market become efficient, I expect the local currency to appreciate,” Ncube said.

Economic analyst Richard Mawarire said the fiscal budget review statement is expected to spell out the financing mechanisms for the procurement of maize in light of the El Nino induced drought.

In addition, he said, the review statement will also focus on civil service remuneration in light of depleting incomes due to inflation together with downward review of taxes in order to boost disposable incomes and aggregate demand.

He said the budget review will also consolidate the gains made on the monetary front to open up the market and creating a suitable environment for interest rates, inflation and exchange rates determination. “In light of the above, my anticipation is a supplementary fiscal budget of between $2 billion and $2,5billion will be announced.

Largely, I anticipate an expansionary fiscal budget,” Mawarire said. Economist Persistence Gwanyanya said: “We expect government to review

tax downwards especially on civil servants or those in formal sector as they are taxed double on the intermediary tax and the 2 percent tax.”


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