Electricity tariffs exaggerated—MCCCI

The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has bemoaned that its members, mostly industrial companies, continue to be heavily penalised by government through ‘exaggerated’ electricity tariff rates.

MCCCI has since warned that Malawi’s pursuit to industrialise her economy would remain a pipedream and a far-fetched dream unless electricity supply is seamless to players in the manufacturing sector.

In an interview yesterday, MCCCI president Prince Kapondamgaga said the chamber feels that the 2018 – 22 Escom application for electricity tariff adjustment was exaggerated.

In the base tariff application, Electricity Supply Corporation of Malawi (Escom) applied for an overall real increase in tariffs of about 60 percent for the four-year period, with 53 percent applying to the first year.

Against all odds, Kapondamgaga said MCCCI managed to ‘rigorously’ lobby with the Malawi Energy Regulatory Authority

(Mera) to reduce Escom’s request from 60 percent to 31.8 percent and from 53 percent to 20 percent in the first year of implementation.

Following such an adjustment, electricity charges increased by K21.92 per unit [kilowatt hour (KwH)] from K73.23 per unit to K95.15 per unit.

MCCCI’s lamentation comes at a time when the economy is failing to absorb more people in the job market by creating decent jobs or sustaining high economic growth rates.

In recent years, the country has lost most of its manufacturing output due to regular company closures and underproduction, with only those companies surviving the harsh economic environment operating below optimal capacity.

Local policy observers also cite prevailing high interest rates, persisting macroeconomic instabilities, high transportation costs, weak industrial linkages, as well the poor policy environment—both at country and regional levels—as other key factors affecting the manufacturing sector.

Kapondamgaga said precedence has it that such ‘exaggerated’ tariffs only benefit non-developmental consumers.

The MCCCI president also said most of the members are not benefiting from Escom’s Maximum Demand Tariff.

“Maximum Demand Tariff involves Escom charging for declared demand of electricity even when the electricity is not supplied. Which means that some of these electricity tariffs are imposed on companies even in the absence of electricity,” he said.

The African Development Bank (AfDB) Malawi Country Strategy Paper covering 2018-2022 notes that Malawi’s manufacturing sector—as a ratio of total employment—has dropped by five percentage points from 19 percent in 1994 to 14 percent in 2017, representing a 26 percent drop.

On the other hand, the service sector rose from five percent in 1992 to 6.5 percent in 2016, which represents a 30 percent surge.

A government economic report for 2018 shows that since 2015, manufacturing’s share of GDP has fallen steadily from 9.5 percent to roughly 9.1 percent in 2018 and is projected to close 2019 at nine percent.