Business

Zim power crisis sparks concern

Tawanda Karombo

As usage outstrips supply, electricity outages are hobbling the country's corporate sector, writes Tawanda Karombo.

Zimbabwean night-school students study by candlelight after a power cut in Harare. (Desmond Kwande, AFP)

Zimbabwe is pinning its hopes on measures such as a Chinese-funded power plant to boost the country's electricity generation capacity and offset a crippling energy supply situation.

 The shortfall has led to escalating operational costs for several companies, many of which have been forced to resort to high-voltage diesel generators during extended power outages. The situation has been further compounded by rising consumption, which has in recent years outstripped supply.

The state power utility, the Zimbabwe Electricity Supply Authority (Zesa), has instituted load-shedding to manage the growing supply-demand mismatch. This has led to suppressed production capacity for Zimbabwe's corporate sector, with industry, manufacturing and mining companies being the most affected.

A recent research report on Zimbabwe's electricity crisis by Business Monitor International (BMI) noted: "Zimbabwe is in the midst of an energy crisis. With peak energy consumption requirements of 2 200MW and domestic generating capacity of around 1300MW, outages are commonplace in the country."

Tafadzwa Manyara, a local engineer, said that Zimbabwe "needs close to 2 500MW, yet we are generating less than 1 500MW". Analysts blame the power utility for the country's electricity supply woes, but Zesa counters that corporate and individual consumers are not paying their bills. Powerful individuals, among them high-ranking government officials, are said to owe Zesa money.

Various initiatives are now underway to try to boost Zimbabwe's electricity generation capacity. Among these are plans by a Chinese company, the Guangdong Bureau of Coal Geology, to invest about $3.5billion to fund the construction of a 1200MW thermal power plant.

Indigenisation policy
Chinese investors receive special concessions from President Robert Mugabe's government and sources say they will not be required to cede a 51% majority shareholding to locals under the government's controversial indigenisation policy. Other foreign investors are buckling under government pressure to cede majority stakes to black Zimbabwean groups or risk being kicked out of the country without compensation.

Platinum miner Zimplats has had to advance a $25million loan facility to Zesa. The power company has used the money to reduce arrears it owes to Mozambique's Hidroeléctrica de Cahora Bassa, enabling the resumption of electricity imports. In return, Zimplats will receive guaranteed power supplies for the next three years.

Other mining companies are reportedly paying more for guaranteed electricity supplies. However, most businesses in Zimbabwe have to deal with the regular power outages.

Finance Minister Tendai Biti has said that Zimbabwe is negotiating a $350million loan to expand the Kariba South power station to provide an additional 300MW of electricity.

 Other reports suggested that a French investment consortium had been granted a licence to build a 2000MW thermal power plant in a deal reportedly worth about $3billion. Zimbabwe also has vast coal resources that could help to generate more power to offset the supply gap.

Engineer Manyara said the country needs to "invest in power generation" and "allow private players in the power generation field". He said there was also a need for a "good revenue collection strategy, like prepaid meters" and urged more usage of other energy sources such as natural gases, solar power, wind power and uranium.

Johannes Kwangwari, an economic analyst, said that additional operational costs incurred by companies running generators were forcing them to raise the prices of goods and commodities. "The companies have to recover their costs, and the ultimate impact will be on inflation and price distortions," he said.

Researchers at BMI, however, said that Zimbabwe's overall power generation will increase by an annual average of 12.6% between now and 2016, to reach 16.23 terawatt hours. "The biggest contributor to this increase will be coal-fired power generation, which is to increase by an annual average of 22.8% over this period" because of expansion at the Hwange thermal power station.

"Hydropower generation is due to increase by a much more modest 3% per annum, despite increased capacity planned for the Kariba South hydroelectric plant and a new plant planned on the Gairezi River. However, this growth in energy provision will not be enough to grant Zimbabwe energy self-sufficiency," the report noted.

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