Zambia’s electricity costs will be the “defining issue” for the mining sector this year and beyond, Chamber of Mines President Nathan Chishimba said on Thursday.
The southern African country, which is a major copper producer, is struggling to maintain power supplies as a severe drought has caused levels to drop in the Kariba Dam which generates much of the nation’s electricity.
Zambia’s Finance minister Felix Mutati said in this year’s budget speech that the government planned to raise electricity tariffs to reflect production costs by the end of this year.
Chishimba said mining companies were in talks with the government on the higher tariffs but declined to disclose any further details.
“At present, the cost of producing electricity in Zambia is not known, as the last study was done … 10 years ago, in 2007. However, a new study, funded by the African Development Bank, is expected to commence in the course of 2017,” Chishimba told journalists.
Chishimba said proposed electricity tariffs at Zambia’s newest power projects were more than 20 percent above global benchmarks established by the U.S. Energy Information Administration.
“What this suggests is that Zambia’s electricity is not being produced efficiently by global standards, or there is a lack of transparency around the way in which tariffs are calculated,” Chishimba said.
Zambia needed a revitalised, reformed power sector able to deliver cost-efficient, competitively priced electricity to grow the economy, he said.
Zambia’s copper production rose to 770,000 tonnes last year from 711,000 tonnes in 2015 but below the target of 1 million tonnes largely due to restricted power supply, Chishimba said.
(Reporting by Chris Mfula; Editing by Jane Merriman)