The Swaziland Electricity Company continues to invest heavily in capital projects despite enormous economic challenges, Managing Director Pius Gumbi tells South Africa Magazine.

By Ian Armitage

Swaziland has been faced with enormous economic challenges, exacerbated by a major decline in revenue from the Southern African Customs Union (SACU).

Revenue from SACU – the world’s oldest customs union, comprising Botswana, Lesotho, Namibia, Swaziland and South Africa – contributed 76 percent of the Swazi government’s income in 2009 but dropped in 2010 and is expected to continue declining over the next decade.

The global recession has been blamed, and it is within this new framework that the Swaziland Electricity Company (SEC) must operate.

“The situation is challenging and we are dealing with a potential decline in business as a result of major customers opting for self-generation. This is due to the high increases in tariffs over the past three years, as well as the decline in the industrial base,” Managing Director Pius Gumbi tells South Africa Magazine. “Our country’s economy has come under severe pressure as a result of the significant decrease in SACU revenue. This has seen the country’s deficit increasing and has forced Government to cut down on certain capital projects and expenditure.

“The reduction in economic activity has also had a negative effect on our business growth. The closure of two big companies during the last financial year has had a negative impact on our business. This is reflected in a 4.1 percent decrease in our sales volume.”

Despite negative macroeconomic challenges, SEC has performed exceptionally well.

“We are restructuring to ensure we remain sustainable. Emerging challenges include the increasing domestic network, which puts a strain on the quality of supply as well as the decline in large customers. This is due to a proportion of them closing down, others opting for self-generation as well as a decline in the industrial base.

“Some elements of the restructuring remain ongoing, in particular the remuneration review, whose objective is to address concerns about manpower costs. We remain positive that once all the ongoing initiatives are implemented, they will see us remain sustainable in these arduous economic times.”

SEC is currently in the process of converting customers from the post paid to prepaid system, a process that is close to completion.

It’ll help improve service, Gumbi says.

“We want to ensure all of our valued customers are serviced properly,” he explains.

SEC – formerly Swaziland Electricity Board – is state owned and sole provider of power in the country.

It has, over the last five years, been involved in infrastructure development through out Swaziland.

The projects for 2011 included the construction of new substations in Mayiwane and Lawuba and the completion of Manzini North.

Manzini North Project was completed on schedule and commissioned in July 2010. The substation is expected to improve the quality of supply in the sub-region.

The Mayiwane Substation and the feeder line from Sihhoye were awarded to Consolidated Power Projects (Pty) Ltd in October 2010 and the construction work began with the feeder line in February 2011. This project is expected to be completed by December 2011.

SEC is also in the process of building four new depots.

Gumbi says the depots will help improve the company’s turnaround time and meet customers’ needs.

So far SEC has been able to secure land for such projects at Madlangemphisi and Sithobela areas.

Gumbi says alongside the depots, land had been secured for the building of substations at Nkhaba and Siphofaneni. A project called system re-enforcement had started at Mayiwane where a 66/11kV substation would be built. It would be powered from an overhead line from Sihhoye, which would be constructed on steel monopoles.

“These depots will assist in bringing service closer to customers and also in responding to incidents promptly,” Gumbi says.

“In response to His Majesty King Mswati III’s call to lead the country towards attaining first world status, we continue to invest heavily in capital projects,” he adds. “During the last financial year, E228 million was spent on new projects, some of which were still in progress at year end. This will ensure stability in power supply.

“It is regrettable that no progress has been made on the Thermal Power Station Project due to a delay in obtaining the Mining and Exploration Licence from the relevant body. We remain hopeful that this will occur soon as all the Company’s necessary preparations have been concluded.”

During 2010/11, SEC recorded a total income of E190 million, a 58 percent increase compared to the previous year.

Revenue increased by 22 percent to E973 million, which is attributed to tariff increases.

The stability of the local currency, the Lilangeni, against the US Dollar and the Euro helped the Company to keep foreign exchange losses to a minimum.

“SEC’s customer complement grew by 13 percent, bringing the total number to 99,631 from a previous customer base of 88,182,” Gumbi says. “SEC continued to roll out the Prepayment Project resulting in 83.4 percent of SEC customers migrating to prepaid supply.

“Customer growth by tariff category continued to be dominated by the domestic sector which constitutes 89 percent of SEC’s customers.”

One of the biggest threats to SEC is theft. It is losing about E136 million per year as a result of people stealing electricity.

Gumbi says the commercial losses of electricity being stolen through illegal connections are a great concern, as a lot of money that would otherwise reduce the cost burden on honest consumers was being lost.

People steal electricity through bypassing SEC’s system, which has a negative effect on good customers who end up footing the bill because SEC also has to meet its obligation to Eskom.

It is a catch-22 because one of the reasons people steal electricity is because is often expensive.

SEC is currently buying units at E221.43 during peak hours and some would find themselves spending in the region of E1 million on just electricity.

“It’s a challenge for the country as a whole,” Gumbi says.

Swaziland does not currently allocate money in its national budget to address this issue.

A potential solution could be amending the Electricity Act, which does not currently have any punitive measures for people who steal electricity.

SEC is able to trace people who steal through compilation of a consumption report. A red flag could be raised where someone who had been spending maybe E500 per month suddenly spends less than E50 through tampering with the prepaid meter.

To learn more about SEC and the themes in the article visit www.sec.co.sz.

Image: Getty