Tuesday, November 29, 2022

Gov’t should speed up creating power and water regulator

During his State of the Nation address, President Ian Khama hinted at the creation of a Power and Water regulator.

No one can dispute the fact that the year 2010 is arguably the hardest period for most Batswana, whether it is business people or ordinary folks. Cost of living has gone up tremendously, with a shopping basket that could have been filled up by P100 at a local chain store in 2008 now requiring someone to dig deep into their pockets.

This is also not helped by the weaker currency, which means more money is chasing fewer goods, so say economists.

A lot happened during the past year. One cannot forget an increase in the Value Added Tax (VAT) by 2 percent, from 10 percent to 12 percent. Some people argue that this tax, which is collected by businesses on behalf of the state, is still low compared to South Africa, where VAT is 14 percent.
But to many, the 2 percent adjustment is having an impact, especially on the poor members of societal strata. VAT does not discriminate.

To make the situation worse, Botswana Power Corp was forced to increase its tariffs by 30 percent and by another 5 thebe, for National Electricity Standard Connection (NESC), which has raised P76 million so far.

VAT increase, although having an impact on the lives of many, was necessitated by the need to capitalise government coffers in an effort to finance government development plans.

On the other hand, tariff increase for BPC was to help the corporation continue providing electricity to consumers although the argument doing rounds is how the 30 percent tariff hike was arrived at.

Minerals, Energy and Water Resources minister, Ponatshego Kedikilwe, points out that government was considerate in granting BPC the go ahead.

The minister says the realistic tariff hike could have been 55 percent, but could not do that as it considered other factors, which is why we welcome the decision by government to set up the muted Power and Water regulator.

The regulator, like what is happening in the telecommunications sector, will review tariff hike proposals by the providers of the utilities. The regulator will have the powers to decline or accept the proposals.

Countries like South Africa already have power regulator who is always keeping the cash-strapped Eskom in check so as to avoid passing unnecessary cost to the consumer.

For the case of Botswana, the proposed regulator will keep an eye on BPC and Water Utilities Corporation (WUC).

WUC, which will take over the distribution of water in rural areas and sanitation services, is a corporate body which mixes providing water with business and it will face resistance going forward.
The expected difficulties it will face will be better handled by an independent body rather than politicians who may opt for subsidies. There are already calls by economists for government to review scrapping the VAT charged on water to avoid denying the poor access to water.

On a related picture, Botswana recently got a glimpse of what will happen when Eskom switches off the country from its grid with one of the biggest and worst power cuts in recent history. Botswana Power Corp. explained that this was not load shedding, but possibly some disruption in one of the power lines that link up the country with South Africa.

Businesses lost money and home appliances could have been damaged on the way.

Although this was not load shedding, our concern is the country’s readiness when South Africa starts reducing electricity exports to Botswana from next year at a time when Botswana has not built enough capacity to prepare for the worst case scenario. It is also a major threat to national security.

At the moment, the country has ongoing power projects amongst them Morupule B, which will take time to be commissioned. There are other smaller ones, but the major one is to increase the capacity of Morupule, a project which is expected to be complete in 2012.

South Africa projects that it will have its own power deficits next year, which means more pressure on politicians from across the border.

Kedikilwe is a bold minister and we urge him to use his regular media briefings and tell the nation that Botswana could have done better by investing in power stations when they were still cheaper. Botswana relied heavily on cheap imported electricity and will pay the price.

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