Difficult times lie ahead as electricity tariffs rise

Dar es Salaam.  Many people have been psychologically tuned to expect a new year  to  be the bearer of  good tidings that would make them happier than during the one just gone by.

In reality, though, those expectations are shattered by mostly economic developments that leave many people a frustrated lot. Like fellow global family  members elsewhere, most Tanzanians engaged in an assortment of merry-making as  seconds ticked by on Tuesday midnight and 2014 dawned on Wednesday morning.

But, as the tempo of New Year goodwill greeting exchanges cools, the bitter realities of taxing financial and  associated challenges   sink into the minds of the celebrants.

Topping the list is the  three-year-long 40 per cent increase in electricity rates that takes effect this month. The development, announced by  the Energy and Water Utilities Regulatory Authority (EWURA),   means that, consumers – from ordinary wananchi households to big  industrial manufacturers –  have to devise ways of how  best to cope with the challenge.

Under the new arrangement, domestic consumers,  the group formerly in the below-50 units per month  bracket, have been ‘promoted  in reverse’ to 75 units.  They  used to pay Sh60 per unit, but will now have to grapple with Sh100 per unit -  a  40 per cent increase. Those who consume above 75 units but still remain within the domestic consumption category will pay Sh350 for a unit, Sh77 more than the previous rate.

For domestic consumers, in which the majority of those generally characterised as poor,  the  price review won’t be restricted to the basic challenge of  operating bulbs and  television sets, but  how to absorb higher prices of items like sugar, maize flour and  cement,  which will inevitably rise.

Small commercial and light industries, public lighting and billboards designated as T-1, are now paying Sh306 per unit from Sh221.

Large consumers, from middle to large industries designated as T-2 and T-3 respectively, are paying Sh205 from Sh132 for T-2 and Sh163 from Sh118 a unit for T-3, according to the new charges.

Director of Policy and Advocacy at Confederation of Tanzania, an umbrella organisation representing business interests of industrialists, Hussein Kamote,  said it was  too early to say what actions industrialists would take, but  said raising products price was mminent.

“Even before the increase, depending on the nature of industries, electricity costs range from 18-40 per cent of production costs and to some like cement it can climb to 45 per cent. The production cost will definitely go up and the traditional way to deal with it is to raise the commodity price, and it’s always the consumer who is affected at the end,” he said.

With the nature of the market where traders are free to import commodities from other places, Mr Kamote said it is also possible for industrialists not to increase the price of their products immediately, so as to level the playing field.

“Cement from Pakistan is already slightly cheaper  than the local brands; in such  a situation,  local manufacturers have to reduce their profit margin so as to compete in the market and therefore not increase  the price of their products, but that is a bad thing because with minimal profit, our industries will not grow.”

According to Mr Kamote, CTI advised the government not to increase electricity tariffs, adding that under the current situation,  wananchi would be the hardest hit.

 “People will have to cover the expenses of increased production costs or maybe we should pray that industrialists swallow the increase through reducing their profit margin.”  

On the same issue of energy consumption, users of liquefied petroleum gas (LPG) welcomed the year with an increase of 14 per cent of the commodity.  LPG has been termed as the growing substitute to charcoal and according to EWURA, it is now a fast growing sector.

A spot check by this paper has witnessed that 30 kilogrammes that consumers used to buy for Sh55,000 is now sold at Sh65,000.

EWURA’s Manager for Communication and Public Relations, Mr Titus Kaguo,  told this paper that his organisation was currently not regulating LPG prices. He, however, said that the increase had been triggered by changes in the world market and that they were closely monitoring the sector.

“The price of a tonne of LPG in the world market jumped to 34 per cent at the end of last year, from $900 to $1,200…this perhaps informs the increase here,” he said adding, “But it’s only one major supplier who has increased it to 14 per cent which is justifiable,” said Kaguo.

Kaguo also said that EWURA was set to start regulating the LPG sector.

“Soon we are going to include LPG in our bulk procurement process that will not only help to regulate prices but the quality and quantity of the commodity also. However, there is no guarantee that the prices will go down; it might even rise depending on inflation and other forces in the world market,”  he said.

School fees

On the academic front,  it’s yet another  tension rising season for parents enrolling their children in schools, or the ones already there, given the nine per cent increase  above  last year’s figures.

However, the  Tanzania Association of Managers and Owners of Non-government Schools and Colleges (TAMONGSCO) says that in principle, they were still charging the same fees, only that the changes have been pushed up by inflation rate. Private schools charge fees in a range of $1,000 to 1,500 and $500 to 800 for boarding and day scholars, respectively.

“The exchange rate has gone up from 1,500 in January 2013 to 1,630 in January, 2014. That means, the fee by 2013 was Sh1, 500,000 to 2,250,000 and 750,000 to 1,200,000 for boarding and day scholars respectively,” says  Benjamin Nkonya, TAMONGSCO secretary general.

According to him, in 2014, the fee will be 1,630 to 2,445,000 and 815,000 to 1,304,000 for boarding and day scholars respectively.

“For an eye that is not aided by the macro-economic indicators, the misconception is that the fee has increased by 9 per cent while, when viewed on constant factors ($ terms), the change is zero per cent,” said Mr Nkonya.