Zimbabwe’s political uncertainty and the government’s hold over electricity policies will discourage private investment in the sector, experts said on Thursday, dimming prospects of economic recovery.
The Southern African country suffers chronic electricity shortages, which have hurt industry and households, and state-owned power utility Zesa says it requires up to $5-billion to expand generation and rehabilitate ageing plants.
Zimbabwe generates about half of its electricity and also buys a third of its needs mostly from the Democratic Republic of Congo and Mozambique, but has struggled to pay for imports.
Zimbabwe may find it difficult to attract private investment in the power sector due to negative sentiment about the country after years of economic decline, analysts say.
Miners and manufacturers at an industrial conference said frequent power cuts were stalling economic recovery and tensions in the new administration could undermine policy-making.
”There is need for policy consistency, because the energy projects are long-term. It’s actually a surprise that we have never initiated any power project since independence in 1980,” independent energy consultant Simbarashe Mangwengwende, a former Zesa chief executive officer, told the conference.
”It is very important, if you are to come up with bankable power projects, to have positive investor perception. This is a factor of the political environment.”
Stalled
Rivals President Robert Mugabe and Prime Minister Morgan Tsvangirai set up a fragile unity government in February in a bid to end a protracted economic crisis, but disputes have stalled economic reforms.
Zimbabwe has potential to generate an additional 7 500MW from the current 1 000MW through expanding output at its Hwange thermal plant and Kariba hydropower station and by construction of a 1 600MW hydropower station jointly with Zambia, a 1 400MW thermal power plant and another 300MW plant from gas.
World Bank country economist Rogers Dhliwayo told the conference that Zimbabwe needs to guarantee a return on independent power producers’ investment.
”It is imperative that power is properly priced to ensure sustainable private sector participation, and a situation where politicians intervene in revenue collection is not conducive,” said Dhliwayo.
A government official told an energy forum on Wednesday that the government had completed a draft policy giving guidelines on investment in the sector.
But Mangwengwende said government’s dominance of Zimbabwe’s energy sector also hindered investment.
”A situation where government is the policy-maker, regulator and energy deliverer is clearly untenable. Government should realise that their role is policy setting and regulatory oversight,” he said.
While Zimbabwe had set up a regulatory authority, it needed to be independent from state control, especially in determining tariffs, Mangwengwende said.
Zesa, which currently owes its external power suppliers at least $57-million but is itself owed $200-million through unpaid domestic bills, could raise revenues by increasing billing and revenue collection, said Mangwengwende. – Reuters