A power substation. Kenya hopes to stimulate growth in the manufacturing
sector through a reduction in power tariffs for large consumers. PHOTO |
NMG
The Jubilee government hopes to stimulate growth in the
manufacturing sector through a reduction in power tariffs for large
consumers who shift to night production from this month.
The
policy move that has elicited excitement among manufacturers is
targeted at creating jobs and promote economic growth, but its success
will depend on other issues, especially security and human resources.
Rwanda
has announced a reduction in tariffs for manufacturers by 50 per cent, a
proposal awaiting Cabinet approval. Ethiopia and South Africa, too,
have special tariffs for manufacturers, besides other incentives like
tax breaks.
Manufacturers have been pushing for
implementation of the Time of Use (ToU) tariff for over 10 years, but
distributor Kenya Power has been reluctant due to fears that this would
affect its revenues.
“It has taken 10 years for the
government to appreciate low power cost is about the economy as opposed
to short-term impact on Kenya Power,” said Carole Kariuki, chief
executive of Kenya Private Sector Alliance (Kepsa).
But
Kenya Power managing director Dr Ken Tarus said the company will
implement the directive and does not expect any major impact on its
revenues, considering that the country has a lot of idle power capacity
at night. He said factories will not even need to install new meters.
With Kenya’s total installed capacity standing at 2,370MW, the
country has a significant idle capacity, considering that peak demand
currently stands at 1,730MW while off-peak demand is 850MW.
“We
have excess capacity at night, and that will make it easy for us to
implement the directive without hurting our revenues,” he said.
Countries
like Ethiopia, Egypt and South Africa offer cheaper electricity, so the
decision to reduce the ToU tariff by 50 per cent during is a welcome
relief.
The core principle of the ToU is to encourage
load shifting to level energy demands and increase consumption to
off-peak periods, with the aim of utilising excess power generated.
“To
ensure successful implementation of ToU, there is a need for commitment
towards upholding a stable macroeconomic environment as well as
fast-tracking the implementation of Vision 2030 flagship projects,” said
Phyllis Wakiaga, Kenya Association of Manufacturers chief executive
officer.
She said that power costs are an important
share of operational costs, particularly for cement makers, whose power
costs average 35 per cent.
But the Kepsa says
increased night production will mean more hands on night shift, but not
necessarily lead to higher wages, except in cases where the work done is
viewed as overtime —which attracts double the hourly rate.
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