25% Electricity Hike will fuel Inflation

Zambia will increase the cost of electricity by as much as 25%, the energy regulator said today, a move that is likely to fuel inflation in Africa’s second largest copper producer. The Energy Regulation Board (ERB) said it had allowed state-owned utility Zesco Ltd to increase the cost of electricity by 15.38% for commercial users and 25% for domestic consumers. The adjustments, which are effective from July 1, do not include mining companies, whose cost of electricity was increased by 28.8% in April.

Geoffrey Sakulanda, president of the Zambia Association of Chambers of Commerce and Industry, which represents the business community, said the increase was likely to push up inflation. “It will increase the input costs, which will hit profitability and to offset that businesses will have to pass the costs to customers,” he told Reuters. Zambia’s consumer inflation stood at 7.8% year-on-year in May.

The central bank said last week that prospects for the economy remained positive with GDP growth expected to exceed 7% in 2014 and year-end inflation forecast at 6.5%.

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