Picture: THINKSTOCK
Picture: THINKSTOCK

Harare — On Thursday, the Zimbabwean government  increased electricity tariffs by between 300% and 500% and said the cash-strapped country will stop announcing year-on-year inflation figures until February next year.

Zimbabwe is reeling from severe power cuts of up to 18 hours a day, leading to company closures and reduced production for commodities earmarked for exports.

Last week, the Zimbabwean energy minister Fortune Chasi was in SA to negotiate the resumption of power sales from Eskom. Zimbabwe owes Eskom about R327m and has promised to pay R213.3m before the resumption. 

It also owes a significant amount to the Mozambican government for power imported from the Cahora Bassa dam. 

Presenting his 2019 mid-term budget in parliament, finance minister Mthuli Ncube said the new power tariffs would be implemented with immediate effect with domestic consumers’ paying the equivalent of about US 1c while businesses will pay about US 5c per kilowatt hour.

The electricity hike is expected to further push-up inflation, which was pegged at 175.66% year-on-year for the month of June.

“The Zimbabwe National Statistics Agency (ZimStats) will stop publishing year-on-year inflation stats until February 2020 when the organisation has a full data set of Zimbabwe dollar-priced numbers. In the interim, month-on-month figures will be used to track inflation.”

Ncube said his government had repealed the controversial indigenisation policy that has scared off international investors by obliging them to partner locals. He said another clause that made it compulsory for all diamond and platinum investors to partner government in a 51%-49% partnership had also been repealed.

“With regards to the Indigenisation and Economic Empowerment Act, platinum and diamonds have been removed from the reserved lists and shareholding will be negotiated with the investors.”

Ncube also said the country would maintain its local “Zimdollar” currency as legal tender, but will peg taxes in foreign currency in specified cases.

‘Curious’

In an interview with Business Day after the mid-term budget statement, economist John Roberston said Ncube’s decision to stop announcements of year-on-year inflation was “curious”.

“What it means is that the month-on-month inflation will be lower than the year-on-year inflation. So this will make it appear like the situation is better when it is not. It is just describing the problem in a different manner,” Robertson said.

“The major problem pushing inflation is the exchange rate, which has continued to spiral against the local currency. It is likely to continue doing so because demand for foreign currency remains high.”

In the supplementary budget accompanying the statement, Ncube also announced increases of toll fees and levy duty on direct fuel imports, raising the likelihood of another round of price increases across the economy.

Prices of basic goods and services have skyrocketed by up to 900% since September last year, leading to untold suffering of ordinary citizens whose wages have been rapidly eroded. The average salary for civil servants has contracted to between US$50 and US$4,100.