VINCENT MHENE IN GWERU
One of Zimbabwe’s biggest suppliers of explosives and chemicals, Intrachem (Pvt) Limited, is restructuring its costs in response to a wave of power tariff hike which has seen a rise in operational costs, a company executive has said.
Last month, the Zimbabwe Electricity Transmission Company hiked its average electricity tariffs by more than 300% saying this would allow the power utility to pay for power imports from South Africa and Mozambique.
The increase would also help the power utility to repair its generators.
This week, the power utility again increased the price of electricity by 50%, the third rise in two months.
Intrachem chief executive officer, Langton Nyandoro, indicated that higher electricity tariffs would hurt the company’s products’ competitiveness in the local and regional markets.
The latest move has led to an outcry from consumers who are grappling with high inflation that is eroding their earnings.
Consumers seem set for more increases after the energy regulator said starting this month, the power utility would index its tariff to the United States dollar to enable it to recover from “inflation and exchange rate changes”.
The tariff hike is likely to ignite another round of price increases of goods and services.
Faced with the continuous hikes, Nyandoro told Business Times that the company had used the old power tariffs in its initial costing model and was now restructuring it to factor the new tariff regime.
“We are flat out right now, busy putting that back into our model,” Nyandoro told Business Times.
“Obviously, the tariffs that were announced recently are not the ones we used in our model and we are busy analysing the impact of that on our end product.”
Nyandoro said the tariff hikes have a significant impact on the competitiveness of the company’s products in local and regional markets.
As a result of electricity tariff hikes the company’s production costs skyrocketed.
“We are busy analysing the impact of this power tariff increase on our final product, suffice to say that we need to be competitive as local producers and it is an area that we have stressed emphatically to the Minister of Industry and Commerce [Sekai Nzenza],” Nyandoro said.
He added: “It`s important that we remain competitive otherwise some of the decisions that might be well meaning on the part of the government would end up driving us out of business.”
Established in 1990, Intrachem is constructing a US$5m explosive manufacturing plant in Kwekwe, which started in 2019.
The plant is almost complete, and it started undergoing dry commissioning last month, according to Nyandoro.
Intrachem expects production to reach 2 500 tons per month.
The company is in its second phase of expansion and intends to start the production of raw materials for explosives.
Meanwhile, small and mediumscale miners are feeling the pinch of the electricity tariff hikes.
Confederation of Zimbabwe Miners president, Rangani Chauke, told Business Times that the miners were now facing viability challenges as tariff hikes were already pushing up production costs.
“Already small and medium scale miners are facing viability challenges and with the power tariff increases being effected it worsens these viability problems.
We would want the government in the future to approve hikes of not more than 20 percent.