eBusiness Weekly
Taking Stock Kudzanai Sharara
When Zesa announced it would implement load-shedding across the country, the main reason was that it was no longer able to generate power at maximum capacity at Kariba Dam due to low water levels.
If we didn’t know better, we would have said no one is to blame, it’s an act of nature, an act of God. But we know Zesa. If we are to be honest with ourselves, we would know that the power utility has been operating at sub optimal tariffs for years, itself a recipe for the disaster we are experiencing now.
According to the Zesa website, local tariffs at US9,83c/kWh are lower than average regional tariffs of US14c/kWh. The last tariff increase was in 2011 and according to studies this will prove detrimental to the viability of any power utility.
A 2016 World Bank study titled “Making Power Affordable for Africa and viable for its utilities” identified incremental tariff increases as one of several solutions that can help address viability concerns for electricity producers. This is what they do in South Africa where tariffs are increased gradually at a certain percentage.
But for years, Government denied Zesa to make those incremental tariff hikes for fear of making people’s livelihoods hard. However, this was just as good as kicking the can down the road. Chickens will still one day come to roost and they have now.
Government, in rejecting Zesa’s application to put up tariffs, cited inefficiencies at the power utility. But the World Bank report cited above, showed that removing inefficiencies cannot expand electricity access, hence tariffs must be increased to allow utilities to expand their reach.
Zesa spokesperson Fullard Gwasira put it bluntly “what is not paid for correctly cannot be availed. If you are selling produce below the cost of production, it’s a matter of time before these products are not available”.
Inefficiencies
This is, however, not to say Zesa is not without blame. The power utility has high operating costs, something which has forced Government to re-bundle the power utility in an effort to cut overhead costs and boost power generation efficiency. Government first unbundled Zesa in 1997 and later in 2006 and this created eight entities out of the one company and each one has a chief executive (officer), if not several chiefs; and each one has an official vehicle which matches the title. The costs are too high. Amalgamating them again will have a telling impact on tariffs.
Then there is corruption and abuse of office as unearthed by a Price Waterhouse Coopers’ forensic audit. The audit is reported to have dug a slew of scandals over tender malpractices, abuse of office and shoddy corporate governance practices among other forms of corruption.
While some of these matters are before the courts, what is of no doubt is that corruption adds to the cost of doing business. It’s also an indication that some resources, which could have been ploughed back into Zesa’s infrastructure were misappropriated and the negative impact now show.
Refusal to pay bills
Failure to pay bills, especially by politicians and Government officials also borders on corruption. We have heard reports, some before the courts, that senior Government officials and powerful politicians simply refuse to pay electricity bills even for what they would have used for commercial purposes at their farms and companies.
Zesa is owed approximately $1 billion by its clients throughout the country with local authorities being the biggest defaulters, while individuals at some point owed $300 million. All this is at a time the company is technically insolvent as it owes creditors in excess of $1 billion, far more than it is owed by its own debtors. Given such a scenario isn’t it foolhardy to then expect Zesa to operate viably and reinvest in new power generation plants.
Then we had debt write-offs
Soon after the July 2013 elections, Zesa wrote off debts owed by farmers and domestic users with the biggest beneficiaries being politicians and Government officials who used electricity at their farms, companies and mines.
Although the total write-off was $170 million, this generosity was just a populist push by the then Government and plunged Zesa further into distress and anguish. The costs of such a policy were always going to come one day and the fact that Zesa is still failing to meet electricity demand and has to rely on imports is just one sign of this cost.
Climate change is real
Last year, Zimbabwe commissioned two new power-generating units at Kariba South Power Station (KPS), adding an extra 300 megawatts (MW) to the national grid. But this was without thought to the song of climate change that the world has been singing for some time now. Climate change is real and in the years to come, the world might not be getting as much rainfall as it is getting now. What will become of these new investments? If water levels remain dire, how will Kariba South Power Station generate enough power to service the cost of debts use to construct it?
Climate change is also the reason why some banks are moving away from funding thermal-based power plants. In a major shift away from dirty fossil fuels, global banks are reviewing their coal investment policies amid rising concerns about climate change and in support of the 2015 Paris Agreement.
“Climate change is one of the single biggest challenges society has to address. More than 1,1 billion people still do not have access to reliable power but recent developments in technology mean that alternative sources are increasingly available to meet that need without the impact of coal-fired power on the environment,” Standard Chartered CEO, Bill Winters said.
But it’s a lesson Zesa and the Government is still to learn given the lack of enthusiasm and determination to channel energy and resources on renewable energy. Focus has been on one deal, the Gwanda solar power project, which unfortunately mirrors the overall rot at Zesa, from corruption, mismanagement, incompetence and ultimately lack of ENERGY.
