Power cuts costing Zim millions

ZIMBABWE could be losing hundreds of millions of United States dollars per month due to the intermittent power outages that have worsened over the past two months and are costing the country in income, jobs, tax revenue and competitiveness, analysts told the Financial Gazette this week.ZESA PYLONSThe country needs about 2 200 megawatts (MW) of electricity but local generation is failing to meet the demand. Only 1 300 MW are being produced, with the balance having to be imported.
The Zimbabwe Power Company (ZPC), a subsidiary of ZESA Holdings, says the power cuts could worsen before they get better.
Alongside households, industry and other sectors are battling to meet targets, let alone survive with the repeated power-outs.
“The power cuts are wreaking havoc on industry,” said Charles Msipa, president of the Confederation of Zimbabwe Industries (CZI).
“As you know (electric) power is the lifeblood of industry. And the fact that in the past month the cuts have become more pronounced and less and less predictable is very rough for industry — all industry — and particularly those who manufacture sensitive products.”

Unstable power supplies are causing companies to incur heavy losses as some processes are interrupted thereby affecting the quality of products; some processes are then delayed or aborted resulting in failure to meet deadlines and targets for many companies.

Some products affected by the power outages in mid-production become either sub-standard, deformed or of such low quality they cannot be redeemed.
“Some industries are very sensitive. Some products once affected in mid-production would be no good and have to be dumped. Take for example the food industry, certain products have to be kept, or even produced, at certain temperatures and if you can’t maintain those temperatures you have to dump them,” Msipa said.
“The costs emanating from the power cuts are huge. It is not just that companies are failing to produce as per targets, but as a company you are also paying people to stand around waiting for power to come back, and for those that use generators you are also incurring additional costs from the back-up generators,” he added.

Hlanganiso Matangaidze, president of the Zimbabwe National Chamber of Commerce, agrees that there are crippling losses emanating from the power interruptions.
“The impact is very serious,” Matangaidze said, adding that he would have hoped that since there was now reduced capacity utilisation in industry the available power would be enough for those industries still standing.
“We had hoped that with reduced capacity utilisation, the power would be enough but we are worried that despite the reduction, we are still experiencing such acute power outages,” he said.
CZI, the country’s largest industrial lobby group, estimates that companies are operating at 39 percent capacity while all major sectors of the economy are depressed due to capital constraints. 
Capacity utilisation has reduced following massive company closures in the past decade or so due to under performance of the economy.

Economist, John Robertson, estimates the power cuts to be costing hundreds of millions of dollars per month and says what is worse is that the figure is cumulative and rises with each day and with each outage that occurs.
“There is obviously an effect of efficiency. People are struggling; industries are struggling to produce what they should produce. The power cuts push up costs and the ability to compete and imports become cheaper by comparison. Overall, there is loss of income, loss of jobs, loss of tax revenue for government and loss of competitiveness for companies and this could be millions of dollars lost per month. The problem is that this figure is cumulative and keeps rising, and some of the consequences will not be felt now but later,” Robertson said.

But industry is not the only sector grossly affected. The farming sector is also reeling from the effects of unstable and inadequate power supply.
“Farmers are battling with these power cuts,” said Charles Taffs, president of the Commercial Farmers Union. “They are in serious, serious financial difficulties. We are just coming from the winter crop, which has been negatively affected. Wheat production has suffered, and now we are in early summer cropping, which is also starting to be affected.”
According to Taffs, the country consumes 400 000 tonnes of wheat per year, but the country will this year only be able to produce 12 000 tonnes.
“This means we will have to import 388 000 tonnes,” Taffs said.

While power cuts are not the only factor affecting cropping, it still remains a sore point.
ZESA through its subsidiary responsible for electricity generation, ZPC, generates electricity at its five power stations in Kariba, Hwange, Harare, Bulawayo and Munyati.
The five combined generation total fails to meet the national power demand by more than 900 megawatts, which needs to be augmented by imports.
Although power shortages are not only unique to Zimbabwe but also common in the region, the only thing that makes it particularly worse for Zimbabwe is that this occurs against a background of an economic meltdown which has diminished the country’s ability to source as much power as it needs.

This has been because other countries have their own challenges and needs and also because Zimbabwe has not always been able to pay for its imported electricity.
In recent months, Zimbabwe could only afford to import power from nearby countries. The Hydro Caborra Bassa (HCB) of Mozambique has been a source of power supplements for Zimbabwe.
As at July end, Zimbabwe’s HCB debt was at about US$27 million. In a recent statement, ZESA said load shedding could increase outside published schedule as HCB was undertaking maintenance for an indefinite period.
Recently, Partson Mbiriri, the permanent secretary in the Ministry of Energy and Power Development, said there were plans to revamp the northern Kariba Hydropower Station and the Hwange Thermal Power Station, among other plans.
He, however, said the country would only be able to generate enough power by about 2022.
“We can’t fix it quickly. It will take time,” Robertson pointed out.
Reports say the ZPC needs about US$300 million to refurbish the plants.
Future plans to address the power challenges also include a memorandum of understanding signed between Zimbabwe and Zambia for the US$2,5 billion Batoka Hydro-electric power station. 
This station is expected to be shared equally between the two countries and would be the second power project to be shared by the two countries after Kariba’s Hydro-electric power plant.



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