Case for internal devaluation: Start with Parastatals and monopolies, says industry
THE protection of Parastatals and maintenance of monopolies in certain sectors will lead to a very slow process of price correction and internal devaluation, industry has said. This comes as Government and local businesses continue to debate over the need to address the key cost drivers and who will lead the internal devaluation implementation process between Government and the private sector.
Confederation of Zimbabwe Industries president Busisa Moyo told an internal devaluation symposium this week that there was need for a mechanism that would enable Parastatals and certain monopolised sectors to operate competitively in order to create an enabling environment for the private sector. “If certain sectors are protected, enhancing or promoting competitiveness will be difficult and this slows the process of price correction.”
An analysis of the key cost drivers identified by industry reveals the majority of them are influenced by state owned players. The cost drivers which need urgent rebasing are Energy costs; electricity, fuel and coa, Labour costs, Logistic and transport costs, Financing charges, rates, levies, penalties, fees, statutory, City & Rural Councils etc, farming input costs and rentals.
Competitions and Tariffs Commission chairman Dumisani Sibanda said the monopolies are there because Government has not taken steps to align their prices with affordability. “It’s a big problem. There is no competition for these Government owned institutions as they have set tariffs, like in the case of power. Such prices need to be addressed as most of them are hiding inefficiencies and underperformance in such a monopolised structure.”
Giving Zesa as an example, Sibanda said there was need for Government to create efficiency in the parastatal by separately accounting for thermal and hydro power. “The country is losing a lot of money by covering the inefficiencies of thermal using hydro. And Government is not holding executives accountable. The landed price of coal at the thermal stations is much higher than anywhere else but the executives don’t care as they know they will hand down the costs to the private sector. This however weakens the economy. Zesa can be more efficient.”
Zimbabwean-based firms face the highest (i.e. least competitive) electricity costs regionally. ZEPARU executive director Gibson Chigumira said the average of the four neighbouring countries (Botswana, Mozambique, South Africa and Zambia) at the lowest level of commercial consumption is 8.3 cents per KWh, which is 57% of what Zimbabwean businesses pay for electricity.
“Sixty percent of power is generated at Kariba at a competitive cost (hydropower), a benefit that is being washed away by much more inefficient thermal stations.” FinX
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