Despite modest investments in Zimbabwe’s energy sector, potential output remains far from being enough to support investments in the economy, analysts have warned.
With new investments trickling into the mining and manufacturing sectors, there will be a huge demand for power in the short to medium term, analysts say, adding more investments are “urgently” needed to avert potential electricity crunch.
Zimbabwe is already facing power cuts, also referred to as load shedding, sometimes lasting for more than eight hours a day. As the winter season approaches, the situation is likely to get worse, as the demand for electricity normally surge.
“With no corresponding investments in electricity generation and transmission, we are likely to see slowdown investments in the economy particularly mining, which require a lot of energy,” economist Timothy Nhetera told Business Weekly.
“There are big projects coming on stream including the carbon steel plant in Chivhu, the Karo Resources platinum project, new coal mines in Hwange, expansion projects in the gold, chrome, nickel and manufacturing sectors…and all these need to be supported by provision of essential utilities such as power,” he added.
Analyst Carlos Tadya, said in the absence of essential utilities such as electricity, “this dents Zimbabwe’s potential at attract investments.” “It is good that the private sector is investing in electricity…but for new investors it is an expensive exercise,” said Tadya. “They will look elsewhere where they are guaranteed of essential utilities.”
Last year, ZESA Holdings, the state-owned power utility received 23 applications from smelting and mining companies, which will require 2 100 megawatts (MW) in the next five years.
Backlog on new connections for domestic customers currently stands at about 320 000 and once hooked, demand for power will also increase.
ZSEA executive chairman, Dr Sydney Gata, told Business Weekly that while nearly 100 Independent Power Producer (IPPs) have been licensed in the recent years, the projects were failing to take off due to reluctance by the Ministry of Finance and Economic Development to provide sovereign guarantees.
Sovereign guarantees are offered for loans to businesses and projects of national significance.
Governments provide a guarantee against default risks for loans, debt securities and other risks for financial institutions that will provide loans to private and public entities and covers both principal and interest of the loan at the time of default.
“We have 94 licensed IPPs with potential of giving us 7 000 MW, but they are not operational because (Finance Minister Prof) Mthuli Ncube is not providing guarantees,” said Dr Gata, who also disclosed that the current power deficit had risen to 3 000 MW.
As of yesterday, ZESA was producing 1 212 MW — Kariba hydroelectric plant (769 MW), Hwange thermal plant (403 MW), Munyati (28 MW) and Harare (12 MW) according to production statistics by the Zimbabwe Power Company, a subsidiary of ZESA.
Zimbabwe imports an average of 300 MW from South African, Zambia and Mozambique. But South Africa’s Eskom, the major supplier could impose curbs on exports after announcing unplanned outages over the April-August winter months.
In a scenario with 13 500 MW of unplanned outages there could be 37 days of power cuts during winter and 104 days in a scenario with 15,000 MW of unplanned outages,” Reuters reported on Wednesday.
More than 15,000 MW of capacity was offline because of breakdowns at various stages this week, it added.
The only notable power project under implementation is the expansion of Hwange thermal plant by additional 600 MW under a US$1,4 billion with Sino Hydro.
There are several other small solar projects being implemented by private companies, notably mining firms.
This year, solar projects, with the capacity of 70 MW would be commissioned, according to Energy and Power Development Ministry.