Expensive electricity will cause multiple problems

Monitor Editor | Monday March 17, 2014 15:19

While this long awaited law would be highly welcome, the Minister of Minerals Energy and Water Resources Kitso Mokaila has not hid the fact that the generation of electricity by the private sector is going to come at hefty costs, resulting in the escalation of the costs of electricity to the consumers. We are not talking about the 10% increase in tariffs that Minister Mokaila announced this week; it will be a more serious and frightening story when the private investor factors in their production costs and profit margins expected. This brewing scenario on the horizons immediately brings back memories of one of the obstacles to doing business in Botswana over the past years—the exorbitant costs of electricity in Botswana over many years has caused a lot of concern to current and potential investors; often leading to the closures of businesses.

Going forward, one would have thought this scenario was about to change in order to increase Botswana’s attractiveness and competitiveness as an ideal destination for investment. Those hurdles are getting bigger and bigger.  The consequences of operating in high electricity tariffs economy includes overly expensive products and services, as investors try to cushion themselves from the high tariffs by transferring the high costs of operation to the market. In a global village economy of today, it will not be uncommon to see more businesses preferring to set up outside Botswana and only coming here for tendering purposes.

The local economy will be hard hit by the soaring tariffs as they adjust prices to the hefty costs of electricity, resulting in expensive goods, high inflation against the ever-eroding purchasing power of the pula, as people struggle to cope.  As we welcome the much awaited electricity liberalisation laws, it is very vital that we borrow from examples from economies with similar experiences, learning how they have managed to keep their power costs at manageable and affordable levels for all, businesses and homes. Our small population should never again be used as an excuse for exorbitant power costs, let us see ate costs of power that are reflective of a middle to high income economy that Botswana is, especially when judged against the successes of other middle to high income economies in as far as electricity charges are concerned.