A rural electrification program in Zimbabwe, using income-generating activities carried out by local small and medium-sized enterprises (SMEs), has been approved as effective in reducing poverty in the country, said Maxwell Mapako, a senior energy specialist from CSIR Natural Resources and the Environment of South Africa, in an interview with China Development Gateway yesterday.
In many developing countries, the level of electrification is generally seen as one of the key indicators of development. However, contradictions always exist between using expensive high technology solutions and putting it into practice for the poor.
According to Mr. Mapako, in Zimbabwe, about 60-70 percent of the population still lives in rural areas where the economy is much slower. The urban-rural gap is quite large, with an average annual income of US$600 nationwide but only US$60 or even less in rural areas.
Electricity costs in Zimbabwe are about 1 or 2 US cents per kilowatt-hour. Although the Zimbabwean government subsidizes the construction of an electricity infrastructure in rural centers where local government infrastructure such as police stations, agricultural extension and health services are located, the households still must pay grid extension fees from the centers to their homes. This means that only those who are rich can afford electricity and this is why the electricity coverage in rural areas is only 20 percent; a large proportion of the rural people have no connection with electricity. The returns from the electricity supply are far less than the investments made in grid extensions due to low levels of power consumption in rural areas.
To cope with this problem, Mr. Mapako said, Zimbabwe has adopted the Expanded Rural Electrification Program (EREP), a new initiative that was implemented by the Rural Electrification Agency (REA) as a result of government ratification of the Rural Electrification Fund Act in January 2002. It targets income-generating activities, mainly the SMEs in the areas where the electricity grid extends. The services provided by these SMEs include automotive, electrical, electronic, and general repairs, welding and spray-painting, milling, carpentry, secretarial services and general retail sales.
A six-percent electricity tariff goes directly to the REA, instead of the treasury via a government department in a normal way. The agency, using this fund, provides loans to businesspeople and delivers to the site electrical machinery, grinding mills, irrigation equipment and welding machines, anything that local entrepreneurs may order.
The program was launched with an aim to stimulate small-scale commercial and industrial activities in the areas reached by the grid, thus stimulating consumption and increasing investment returns, Mr. Mapako stressed. It is as well a means to use electricity to make money, reduce the poverty in rural areas, and improve the living standards of rural people.
Loans provide more farmers opportunities to use machinery so that they farm more efficiently and at the same time they can use more electricity. Since they benefit more from their production, they have the money to pay for electricity and also to pay for their own personal household use. Taking agriculture as an example, he added, if the irrigation equipment were improved by using the loans from the agency, more crops could be produced, which could bring more income to rural people. In return the government and relevant departments and electricity suppliers could generate more income. In this way the government would be able to extend the grid to more areas.
In order to find out whether this program does bring some benefit to rural SMEs and poor people, a survey was conducted recently in southwest Zimbabwe, among 73 small enterprises located in rural areas. Many of them provide retailing activities as general dealers and sell farm produce. Because the economy of rural areas is mainly based on agriculture, agricultural enterprises are the most prevalent ones, followed by grinding mills, bottle stores, and retail shops. Retailing was considered as the most profitable by a considerable margin, with agriculture and grinding mills also seen as comparatively more profitable.
The survey indicated that employment improved by using the rural electrification program. The numbers of people employed in these enterprises rose from 106 to 285, with an increase of about 270 percent, and 41 percent of these were reported to be female. The reported use of grid electricity among the respondents increased from around 3 percent to 30 percent, a tenfold increase, and the use of other fuels besides diesel seems to have often been eliminated, or in a few cases they were used along with electricity perhaps to cope with power cuts during some periods. The increase of the scope and number of enterprises and the fact that electricity use rose considerably suggests that electrification is indeed one of the major factors.
After the introduction of the EREP, a distinct increase in the prevalence and variety of machinery used was reported. Views on benefits seemed to revolve around improvements to the quality of life. Almost two thirds of those surveyed cited rural development and access to electricity as the main benefits, although some negative aspects, including high costs, slow progress and the selective reach of the program, were also mentioned.
The rural electrification program has been demonstrated a tangible impact on poverty relief in Zimbabwe, at least in the southwest regions of the country. This could also be a good practice and experience to share with other developing countries, because poverty reduction is the world's common goal, Mr. Mapako concluded.
(China Development Gateway by Xu Lin November 27, 2007)