Electricity generation and distribution is a loss making business in Tanzania!?
Friday, 13 November 2009 09:28 | Written by Administrator | 
Economic Road Map
Our country has been facing electric power woes for many years now. And there are no signs that these woes will end any time soon. The question that we ask ourselves is why we have this situation. Under normal circumstances our electric power problems that are characterized by shortage or limited supply in a situation of increasing demand would lead to a response that would be characterized by an increase in the generation and distribution of electricity. Why this response is not forthcoming in the Tanzania context is a baffling phenomenon.
Is electric power generation and distribution a loss making business? By nature it is not a loss making business. But it is by design a loss making business in Tanzania. In Tanzania, by design we are generating a small amount of electric power. This small amount of electric power is transported over long distances at very high costs. Again by design these high costs are not recouped from the consumers under the guise that the consumers will not be able to afford them.
The main advocates of cheap electricity are the politicians who want to win votes at any cost. The country pays a very high cost by way of reduced industrial output during power rationing and destruction of the environment through the cutting of trees for energy purposes. Therefore, whether we are politicians or not we should be asking ourselves the question whether what we are doing in the name of political expediency is worth the cost the nation is bearing and which it will continue to bear for many years to come.
The argument that Tanzanians cannot afford to pay high tariff rates for electricity is an extremely hypothetical one. Suppose we asked Tanzanians if they would be ready to pay higher electricity tariff rates than those that they are paying now for more reliable supplies of electric power, what do we think would be the answer? I personally believe that the answer would be yes from most of the people.
Since Tanzanians are ready to pay what it costs to generate and distribute electricity in order to enjoy the benefits of electricity, we should be asking ourselves as to what is going on in the country. It is obvious that again by design we have established a system which is not responsive to the laws of supply and demand. If we allow the electricity tariff rates to reflect the shortage of electric power in the country initially the tariff rates will go up. This will attract more investors to the sector. The result will be that more electricity will be generated and distributed. With more generation and distribution of electric power under competition, tariff rates will stabilize or probably fall. Consumers of electricity will stand to benefit.
The situation under which consumers of electricity will stand to benefit assumes proper regulation of possible monopolies. The current situation is such that we have a monopoly that enjoys government subsidy by delivering small electricity supplies at a very high cost to the economy. The planning of generation and distribution of electricity in Tanzania is carried out by an organization that is not guided by the principles of business profit.
Some studies of our national electric power utility have revealed that it does not even know for sure how much electricity it generates. The studies have gone further to show that a good percentage of the generated electricity gets lost on the way before it reaches the consumers. The loss is caused partly by outright pilferage and most of the time by leakage because of old and worn out distribution equipment. Failure to generate enough revenue leads to the use of old and worn out equipment.
The distribution of electricity also leaves a lot to be desired. The workers of our power utility do not know their real employers. If you do not agree with me just go out and ask a few of them as to who is their employer. Most if not all of them will tell you that it is the power utility. That is where most of the problems of our power utility start. Because they see the power utility as their employer they have little regard for the electricity consumers.
The real employer of the workers of TANESCO is the consumer of electricity. He/she should be given all the respect that an employer gets. It is so because without the consumers of electricity there can be no generation or distribution of electricity. Because the workers of TANESCO do not know that the consumer is their employer we witness unbecoming behaviour of workers towards potential consumers of electricity. If potential consumers of electricity want power connection more often than not they have to bribe the workers of TANESCO. Indeed, the fact that consumers of electricity are ready to bribe in order to get connected is clear evidence that Tanzanians are ready to pay more to get electricity.
Electricity generation and distribution can and should be a profit making business in Tanzania. One major condition that must be met for this to happen is that tariff rates should be a true reflection of the cost of producing electricity in the country. If politicians want consumers to pay less so that they vote for them they should be ready to pay the difference between the cost of producing electricity and what the voters pay. Otherwise politicians should know that they are compromising the economic development of the country with their short term political gains.
Our country has been facing electric power woes for many years now. And there are no signs that these woes will end any time soon. The question that we ask ourselves is why we have this situation. Under normal circumstances our electric power problems that are characterized by shortage or limited supply in a situation of increasing demand would lead to a response that would be characterized by an increase in the generation and distribution of electricity. Why this response is not forthcoming in the Tanzania context is a baffling phenomenon.
Is electric power generation and distribution a loss making business? By nature it is not a loss making business. But it is by design a loss making business in Tanzania. In Tanzania, by design we are generating a small amount of electric power. This small amount of electric power is transported over long distances at very high costs. Again by design these high costs are not recouped from the consumers under the guise that the consumers will not be able to afford them.
The main advocates of cheap electricity are the politicians who want to win votes at any cost. The country pays a very high cost by way of reduced industrial output during power rationing and destruction of the environment through the cutting of trees for energy purposes. Therefore, whether we are politicians or not we should be asking ourselves the question whether what we are doing in the name of political expediency is worth the cost the nation is bearing and which it will continue to bear for many years to come.
The argument that Tanzanians cannot afford to pay high tariff rates for electricity is an extremely hypothetical one. Suppose we asked Tanzanians if they would be ready to pay higher electricity tariff rates than those that they are paying now for more reliable supplies of electric power, what do we think would be the answer? I personally believe that the answer would be yes from most of the people.
Since Tanzanians are ready to pay what it costs to generate and distribute electricity in order to enjoy the benefits of electricity, we should be asking ourselves as to what is going on in the country. It is obvious that again by design we have established a system which is not responsive to the laws of supply and demand. If we allow the electricity tariff rates to reflect the shortage of electric power in the country initially the tariff rates will go up. This will attract more investors to the sector. The result will be that more electricity will be generated and distributed. With more generation and distribution of electric power under competition, tariff rates will stabilize or probably fall. Consumers of electricity will stand to benefit.
The situation under which consumers of electricity will stand to benefit assumes proper regulation of possible monopolies. The current situation is such that we have a monopoly that enjoys government subsidy by delivering small electricity supplies at a very high cost to the economy. The planning of generation and distribution of electricity in Tanzania is carried out by an organization that is not guided by the principles of business profit.
Some studies of our national electric power utility have revealed that it does not even know for sure how much electricity it generates. The studies have gone further to show that a good percentage of the generated electricity gets lost on the way before it reaches the consumers. The loss is caused partly by outright pilferage and most of the time by leakage because of old and worn out distribution equipment. Failure to generate enough revenue leads to the use of old and worn out equipment.
The distribution of electricity also leaves a lot to be desired. The workers of our power utility do not know their real employers. If you do not agree with me just go out and ask a few of them as to who is their employer. Most if not all of them will tell you that it is the power utility. That is where most of the problems of our power utility start. Because they see the power utility as their employer they have little regard for the electricity consumers.
The real employer of the workers of TANESCO is the consumer of electricity. He/she should be given all the respect that an employer gets. It is so because without the consumers of electricity there can be no generation or distribution of electricity. Because the workers of TANESCO do not know that the consumer is their employer we witness unbecoming behaviour of workers towards potential consumers of electricity. If potential consumers of electricity want power connection more often than not they have to bribe the workers of TANESCO. Indeed, the fact that consumers of electricity are ready to bribe in order to get connected is clear evidence that Tanzanians are ready to pay more to get electricity.
Electricity generation and distribution can and should be a profit making business in Tanzania. One major condition that must be met for this to happen is that tariff rates should be a true reflection of the cost of producing electricity in the country. If politicians want consumers to pay less so that they vote for them they should be ready to pay the difference between the cost of producing electricity and what the voters pay. Otherwise politicians should know that they are compromising the economic development of the country with their short term political gains.