Powercuts weigh on production capacity

19 Aug, 2022 - 00:08 0 Views
Powercuts weigh on production capacity The ZSE

eBusiness Weekly

Enacy Mapakame

As inflationary pressures and exchange rate volatility haunt businesses, erratic supply of utilities is adding to the woes, resulting in reduced productivity.

Recent trading updates by Zimbabwe Stock Exchange (ZSE) listed companies show businesses have not been spared from power blackouts with total volumes on a decline compared to the prior year.

In an update for the quarter ended June 30, 2022, Amalgamated Regional Trading (ART) attributed failure to meet export orders to production disruptions as a result of power outages.

Its overall volumes were at the same level as the comparative prior year.

The group stated that although market demand in Zambia continued to improve in line with positive economic developments, overall export volumes declined by 6 percent as orders could not be met due to raw material shortages and the erratic supply of power.

As a result, total revenue for the quarter declined by 28 percent in inflation-adjusted terms but rose 137 percent in historical terms compared to the prior year.

Its paper division was also affected by factors inclusive of erratic power supplies. Volumes for the paper division fell by 26 percent compared to the prior period with gains made in the first half being reversed due to
raw material shortages, erratic power supply, and major breakdowns at the mill.

Said group secretary Abisai Chingwecha: “The export order book remained firm however viability is threatened by the unfavourable export proceeds retention policies and requirement for exporters to pay for electricity in foreign currency given the prevailing market distortions.”

The challenge is not unique to ART Corporation alone, but an industry-wide problem that threatens business viability and increases overheads for companies.

Sugar processor — starafrica corporation had to invest in energy to minimise damages caused by erratic power supplies in its business which resulted in reduced productivity.

During the quarter to June 30, 2022, production volumes of granulated white sugar at its Goldstar Sugars went down 14 percent compared to the same prior year comparative period due to power and steam supply constraints that were the main causes of the reduced throughput at the refinery, as they negatively impacted plant uptime.

As a result, the reduced production led to a 3 percent decrease in sales volumes when compared with the prior year.

“The business has since installed a 11kV dedicated power supply line, procured a 1 000kVA generator and electrical cables to augment power supply,” said Star Africa in a trading update.

Erratic utilities supplies have become a decade-long challenge for local industry and cited on many fora as among the key factors to reduced capacity utilisation.

The country has been battling to meet its electricity needs due to increased demand for power particularly from mining projects, both old and new, and also rapid industrialisation in tune with the country’s target to become an upper-middle-class economy by 2030.

But the Second Republic has been on energy infrastructure projects in a move aimed at increasing power generation and ensuring the country is energy self-sufficient.

Among other key initiatives is the Batoka Gorge hydropower station which is a 2.4GW run-of-the-river hydroelectric project on the Zambezi River, with that output shared by Zimbabwe and Zambia.

In 2018, Zimbabwe and Zambia agreed to build a $4,5 billion hydroelectric scheme where the Zambezi river crosses their borders and the project is expected to provide about a third of the two nations’ power needs.

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