Electricity levies mostly undermine Kenya's economy

A young man confronted me at one of my public lectures, complaining that when an electric transformer broke down in his rural home, it took two months to restore power to his village. 

In his exasperation, he wondered what the motives of the power company were.  When I told him that every company is motivated by profit, he shook his head. 

If that is true for the electricity giant, he argued, then the transformer would have been restored pronto, adding that when he interned with a local mobile network, the company restored communication in less than one hour whenever it broke down. 

Without much thought, perhaps trying to end the conversation, I told him he was comparing a monopoly with a highly competitive market. But he wasn’t about to give up.

“How come you don’t hear of blackouts in other countries?” he posed.

I took refuge in being philosophical, telling him some people have a higher sense of responsibility than others, but this actually bothered me greatly. Young people are asking questions we should have asked a long time ago.

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Instead of asking the power provider to shoulder its responsibilities and give people reliable, affordable electricity, we run away to buy generators, or enough solar panels to power a small space station. This is happening as the new science of satellite imagery reveals Africa to be the darkest continent. 

The trouble is, this resource, which brings light and energy to our lives, is not urgent to our national priorities.  If it were, we would do more to ensure that every human being had access to affordable electricity. 

Partly, our culture is to blame. We put up housing and other structures, especially in rural areas, in total disregard for planning or resource optimisation.

There are compelling reasons for ensuring access to reliable, affordable electricity, from industry that drives our economic progress to cooling homes in parts of our country, to lifesaving applications.  

Without electricity, many people die because medication for diabetes, which must be refrigerated, loses its potency. Their death certificate may indicate diabetes as the cause of death, but perhaps it would be more appropriate to say the cause of death was poor management of diabetes, or poor storage of drugs occasioned by the irregular provision of electricity.

Discussants at the recent Tourism Summit argued that high electricity costs make Kenya a costly tourist destination.  Costs per night in coastal hotels during “high season” can run up to $400, eight to 10 times higher than some competing destinations. 

It makes no sense to promote local tourism while prices of inputs like electricity continue to soar. 

One of the biggest components of electricity cost is tax.  There are just too many levies that do nothing but undermine Kenya’s economic progress. Here is an actual example of a current domestic Bill: 

Taxes, charges and levies add up to Sh12, 348.11, or 54.45 per cent of consumption (active consumption and water heating). This means households are taxed at a higher rate than corporations.

Given that industrial power use is even higher, how do we expect to be competitive if electricity is priced this way?

If, in 2012, 43 per cent of people in war-torn Afghanistan have access to electricity, why can’t Kenya, which had 23 per cent that year, do the same? Kenya Power has claimed that this year, 60 per cent of Kenya's population will be able to access electricity.

We seem unwilling to expand electricity supply, ostensibly because consumption is not sufficient to match the 2,300 MW capacity. Yet reliable energy to attract new investments is lacking. 

Some youth who moved to rural areas to take advantage of rural electrification are increasingly frustrated, due to frequent power outages. Take Ole Nkai in Isinya, who spent money drilling a borehole.

He spent Sh1.75 million, hoping to connect to the grid and start working farming his 30-acre piece of land, but was shocked to receive a Sh3.3 million quotation in an area that is clearly rural.  There are many Ole Nkais all over Kenya.

An elderly retiree in Subukia was given a quote of Ksh. 1.3 million to connect to a power line that is hardly 50 metres from his house. He gave up, built a biogas digester and installed solar power.

Why can’t the cost of provision be borne by the company? Deliver electricity to anyone who needs it and then charge what such a person consumes.

FRIDGE GUARD NATION

Here in Kenya, even a drizzle leads to a power blackout, although one recent blackout was blamed on monkeys swinging on power lines. Who knows, perhaps even mosquitoes cause blackouts.

No one apologises for the inconvenience, even as power surges destroy many people’s property and occasion business losses. 

One of the hottest-selling items in Kenya is a fridge guard, a special gadget for protecting home refrigerators against power surges. It costs Sh3,000 on average, and without it you may end up buying a new refrigerator.

My guess is that Kenya can reasonably lower the cost of electricity, enable greater numbers of people to use it and stimulate economic development.  As phone scratch cards have shown, if you lower prices, more people buy the service, making the provider more money.

First on the agenda is the removal of taxes and arbitrary levies.  Second is changing the business model, by connecting as many people as possible to shore up demand. 

Third, the law on way leaves should be enforced to the letter, to avoid the costly exercise of growing trees on the intended paths of electricity connections. Far too many power disruptions result from interference with way leaves.

The above Podo tree (Podocarpus latifolius) is clearly on the way leave, but instead of removing it completely as a strategy to contain cost, it is trimmed every three months. 

I guess what people want is sustainable power supply but not sustainable contracts for trimming intrusive trees.  This is what causes power outages.  Many such disfigured trees can be seen along Waiyaki Way and other places. 

The government’s school electrification program is commendable but it should also be linked to youth enterprise.  Such a strategy would spread the cost of delivering power to schools more widely, while creating rural employment. 

One way to create more jobs would be to prioritise anyone who wants to connect power to run a borehole, a chopping machine for cattle feed and to power value addition in cottage industries, in addition to lighting up  a home.

GREEN OPPORTUNITIES

Every county should have a rural resource exploitation program, focused mainly on value addition, which happens to be a Vision 2030 objective.  There should be no room for thinking in silos when compelling solutions exist to lower costs or completely remove subsidies whose cost is passed on to other productive sectors.

Government should incentivise the use of green energy, which is abundant in Kenya. Counties like Turkana, with good water resources, consistently high temperatures for solar farms, land resources and livestock, can form hubs for a leather industry. 

This gaping opportunity is being exploited by our neighbours and other exporters, who buy raw hides from Kenya. Poverty among pastoralist communities would be lessened if processing were done locally. 

The wind farm in Marsabit could be another hub for textile industry and other opportunities that require cheaper sources of energy to make the country competitive.

Gabrielle Bonheur “Coco” Chanel, a French fashion designer and founder of the Chanel brand, once said: “Don’t spend time beating on a wall, hoping to transform it into a door.”

Energy is easily the next revolution after ICT, but only if we see the opportunity it presents to ordinary wananchi who can’t afford it now. 

The writer is an associate professor at University of Nairobi’s School of Business.Twitter: @bantigito