Willingness and affordability to pay for improved electricity supply reliability in Zambia

Zambia has had one of the world’s fastest growing economies for the past 10 years, with real GDP growth averaging 6.4% per annum between 2010 and 2014. Electricity demand has also increased by about 4% per annum since 2000. However, electricity generation capacity has not kept up with demand and as a result the Zambian electricity sector is employing costly emergency measures and rolling blackouts to address the electricity deficit. Most customers of the ZESCO  electricity company face 8 hour blackouts on a rotational basis every day and this affects productivity and viability of businesses.

This electricity supply crisis is therefore a key growth constraint for Zambia and a threat to its economy and livelihoods as vital national resources are now channeled towards emergency power needs. Without intervention, these power shortages are set to continue in the short to medium term. A main problem facing the sector is the fact that electricity tariffs are not cost reflective, which places further pressure on the fiscus and makes it more difficult to attract the much needed private sector investment in the power sector.

This study aims to find out the tariff levels that enterprises in Zambia are able and willing to pay more for reliable electricity supplies. This will be done through a “Willingness to Pay” survey, applied to selected commercial and industrial businesses in Zambia. The results will be used to inform decision-making on tariff setting and planning in Zambia’s electricity sector.