- December 29, 2019
- Posted in LOCAL
Intermittent power cuts this year weighed on the sluggish Zimbabwe economy, already dogged by hyperinflation, recession and a record high unemployment.
The economy has been battling continued shortages of foreign currency and local bank notes, and hyperinflation has led to declining household disposable incomes and a rapidly depreciating local currency.
Companies are reeling from the rolling blackouts that have hit the country as ZESA continues with load-shedding.
Industry players say this is the final nail in the coffin for the ailing economy.
Daily power cuts lasting as long as 18 , and sometimes 20 hours have become the order of the day after ZESA lurched into a crisis due to low generation capacity at Kariba and the failure to service its debt owed to two regional power utilities.
Also inefficiencies at the country’s thermal power stations at Hwange, Bulawayo, Munyati and Harare have worsened the situation.
The impact of unstable electricity supply in Zimbabwe, which is one of the country’s most critical challenges at the moment, has come at a time when the government is on a drive to lure investment into the country.
But there are fears that the power cuts will adversely affect investor confidence.
Manufacturing processes rely on electric machines that require power to perform the precise and repetitive tasks to increase production.
Now, the chronic shortages of electricity, is starting to damage the economy.
The costs vary from direct economic costs, indirect costs, and social costs. Indirect and social costs are equally important components when considering the impact of power interruptions.
Some mines are said to have suspended some shifts this week to avoid trapping miners underground when the electricity cuts out.
To worsen the situation, ZESA has been accused of disregarding an agreement with miners to ensure uninterrupted power supply, a situation which has cost the resources industry millions of dollars in potential lost output.
This has angered the miners who say ZESA’s failure to honour the agreement will put the economy in peril because miners are among the biggest consumers of electricity in the country and are already grappling with weak profits that could be compounded by potential output loss due to power outages of up to 40%, according to the latest survey.
They miners say if ZESA’s continued power generation problems destabilise the mining industry, the economy will feel the pinch, especially if the power crisis forces the sector to shed jobs.
The monetary authorities will also take a hit as mineral exports are one of the leading foreign currency earners for the country.
A survey conducted by the Chamber of Mines of Zimbabwe through consultants Albert Makochekanwa and Caren Pindiri, all University of Zimbabwe economics lecturers, shows that mining houses, despite paying for electricity in advance and in foreign currency under the agreement, have had raw deals from ZESA.
Some miners have been cut off for up to three days a week, the survey showed. Isaac Kwesu, CEO of the Chamber of Mines Zimbabwe, said mining was a critical sector which should be spared the crippling blackouts.
“Mining requires electricity for both operations 24/7 and the safety of workers. It is very costly to have production stoppages. The safety of workers also needs to be guaranteed,” Kwesu told the Business Times.
In response, Owen Mavengere, the retail manager of the Zimbabwe Electricity Transmission and Distribution Company, a unit of ZESA Holdings, said the power utility had prioritised the mining sector “because they have supported us to anchor electricity imports, which are very expensive”.
“We are currently engaging stakeholders for further imports. Unfortunately, where we are coming from, we nearly collapsed, but we are now back on our feet as consumers are now paying the correct tariff,” Mavengere said.
Zimbabwe, requires about 1,800 megawatts (MW) but generates less than 600MW, due to a receding water level at Kariba Dam and inefficiencies at the thermal power plants at Hwange, Bulawayo, Munyati and Harare.
To cover for the shortfall, ZESA has been importing expensive electricity from regional suppliers, mainly from Eskom of South Africa and Hydro Cahora Bassa of Mozambique.
ZESA is procuring very little from the Day Ahead Market, which is a market for trading power by regional players.
This week, the electricity crisis in Zimbabwe suddenly worsened because Eskom stopped supplying ZESA because Eskom is also battling shortages of electricity at home.
Consequently, businesses have lost millions of dollars in potential revenue, and this is threatening the viability of companies. “Some companies have closed as they can no longer afford to run on expensive generators,” the Confederation of Zimbabwe Industry told Business Times.
According to a survey conducted by the Zimbabwe National Chamber of Commerce a fortnight ago, local companies are losing an estimated ZWL$2.5m annually in potential revenue due to power cuts.
The study investigated the impact of electricity outages on activities of the business community in Zimbabwe. Many, however, believe the electricity crisis is a result of years of mismanagement and corruption at ZESA.
Now, the ZESA’s management and the Ministry of Energy and Power Development are struggling to prescribe a formula that would extricate the power utility from the mess.
Soon after his appointment as Energy Minister in May this year, Fortune Chasi said he had signed a mega power deal with Eskom worth 400 megawatts (MW). The nation celebrated. Chasi went on to say he had signed another deal with Hydro Cahora Bassa of Mozambique. The nation celebrated again, only to learn later that the so called mega deals meant that Eskom and Cahora Bassa would only supply Zimbabwe when they had surplus. Therefore, as Eskom and Cahora Bassa have their own supply problems at home, Zimbabwe’s sorrow has continued.
The situation has left ZESA and the Ministry of Energy and Power Development wallowing in self-pity because things have not gone well. They cannot keep the lights on, leaving the economy to run on diesel-powered generators.