BUSINESSES in Zimbabwe and neighbouring countries like South Africa (SA), which are still battling to recover from Covid-19’s negative effects, continue to count the cost of crippling power cuts.
So bad has the situation become, that worried experts say the unrelenting energy crisis now threatens to sink local economies, with dire consequences for jobs, investment and inflation.
In the case of regional economic powerhouse South Africa, economists say it is currently experiencing its worst power cuts on record, with the impact of load shedding estimated to be costing the country up to R80 billion a month and a colossal 350 000 in potential jobs in 2021.
And the situation is just as grim in Zimbabwe, where the country has also been contending with a resurgent foreign currency parallel market, which has blighted investor confidence.
Speaking this week, the chief executive of the Zimbabwe National Chamber of Commerce (ZNCC), Chris Mugaga, said the ruinous effect of power outages in the country and the region was self evident.
He also noted that the blackouts that were being experienced were “a stark reminder” that the recent agreements struck at the global climate change summit in Glasgow, Scotland were in many ways “a luxury” that the sub region could ill afford at the moment.
“Load shedding is leading to an increase in the cost of power as companies resort to expensive power alternatives than conventional sources. “The alternative sources are costing companies almost 150 percent more than conventional power sources, which is unsustainable,” Mugaga said.
“We thus, still need coal here to fire our electricity. The issue of doing away with ‘dirty’ forms of energy, especially coal, when negotiating with others should be approached differently.
“Indeed, we cannot negotiate on equal terms with countries who have been largely responsible for polluting the environment. After all, we still have to generate energy for our industry. We have to deal with our own burden as Zimbabwe … We have to fight hard to make sure that we generate more electricity, which means that COP26 may not apply to us at the moment as it appears like a stumbling block to our energy projects and requirements,” Mugaga further told The Financial Gazette.
The president of the Confederation of Zimbabwe Industries (CZI), Kurai Matsheza, said the ready availability of electricity was a major driver of economic growth.
“Without electricity reliability and availability on a sustainable basis, the wheels of industry can’t turn. The region is suffering serious rolling power cuts, which are affecting industrial output. The current power challenges are definitely militating against efforts to increase production and productivity. As industry, we are continuously engaging the local utility (Zesa) to quickly address the situation so that Vision 2030 does not become a mirage.
“If the power cuts continue, export markets will be lost and this will, in return, reduce foreign currency inflows and consequently lead to job losses,” Matsheza told The Financial Gazette.
“Electricity unavailability affects production negatively in a number of ways. With no electricity there is little production.
“And with less production, the unit cost of production goes up significantly, leading to losses in most cases as producers are unable to pass this cost to consumers.
“In other cases, poor quality products are produced, and all these facts put together mean that the shortage of electricity has a huge negative impact on production,” Matsheza added.
Economist John Robertson said it was clear that the entire sub region was in deep trouble with regards to power generation and transmission.
“The fault affecting us (Zimbabwe) now should be cleared soon, but the region is in deep trouble because of a lack of planning.
“For example, although new supply contracts are to become effective in January, one of the biggest power projects, Lusulu Power Station (a proposed 2 100-megawatt coal-fired power station in Zimbabwe) has yet to be started. It will take four years to build and we should have started it in 2012,” Robertson said.
“The authorities should be looking for the people who are holding up developments and charging them with economic sabotage in deserving cases,” he said.
President Emmerson Mnangagwa, pictured above, said recently that he was confident that power shortages would be a thing of the past in three years’ time.
“Minister of Energy and Power Development (Zhemu Soda), I want that in this country, after two years, maximum three years, we should have all the energy we want and no one should be able to spell the word ‘load-shedding’.
“In addition, these interventions will consolidate stability of the electricity supply system, reduce technical losses and bolster power supplies within the Southern African Power Pool transmission grid.
“Meanwhile, the Integrated Energy Resource Master Plan must be speedily completed,” Mnangagwa said while speaking in Harare.
Zimbabwe now requires about 1 500MW of electricity a day, down from the 2 000MW of yester-year due to de-industrialisation.
The country has been supplementing its electricity needs with imports from South African power utility Eskom and Mozambique’s Hidroeléctrica de Cahora Bassa.
At the same time, Zimbabwe is also rehabilitating Hwange Expansion Project for units 7 and 8, upon whose completion in 2022 the project will increase power generation from the current 600MW to a significant 1 200MW.
What is worrying many local analysts is the fact that the worsening regional power crisis is coming on the back of the Covid-19 pandemic and the violent riots that rocked SA earlier this year, disrupting key supply chains.
That mayhem, which paralysed Zimbabwe’s biggest trading partner for weeks on end, was ominous for all neighbouring countries, with experts noting at the time that when Pretoria sneezes, Harare and Sadc catch a cold. The protests shuttered businesses and disrupted transport networks in the country’s two richest provinces, Gauteng and KwaZulu-Natal, with essential services like banking operations, healthcare and power maintenance negatively impacted.
Economist Eddie Cross was among those who said at the time that the situation unfolding across Zimbabwe’s southern border needed to be taken very seriously.
“SA is the biggest economy in the region and the second biggest in Africa. Its role in the African economy is dependent on confidence and the ability of its citizens to trade freely.
“SA is of critical importance to the region and what is going on there has profound implications for many,” Cross said then.
“For Zimbabwe, the majority of our foreign trade is done through South African ports and any disruptions will have profound implications for us.
Even the movement of our high value platinum products to SA are under threat and so are our cashflows. This is very serious,” he added.
Mugaga chipped in, saying that there was no doubt that SA’s role in fostering stability in the region was at risk at the time.
“The issue is multi-dimensional — with diplomatic, economic and social implications. At the diplomatic level this could see the erosion of South Africa’s role in the region.
“At the moment, SA plays the big brother role in helping maintain stability, but it could now lose its moral ground and that is a huge issue,” he said.
“The Durban route is a very important trade route, and as such any disruption is very unwelcome. But in this case, however, Covid-19 had already disrupted trade significantly.
“At a social level, there are going to be job losses in South Africa as a result of this and foreigners will be affected the most and this means a lot of Zimbabweans in South Africa could lose their jobs,” Mugaga added – Fingaz