Power cuts affect the economy

Power cuts affect the economy

By Letwin Mazarura

The load shedding hitting the country is set to derail economic growth prospects during a difficult phase for Zimbabwe when the economy is reeling from the effects of COVID-19.

Zimbabwe Electricity Transmission and Distribution Company (ZETDC) , a unit of ZESA Holdings Limited that interfaces with consumers, announced last week that there would be 12-hour rolling blackouts in the coming weeks as the 1 050 megawatt (MW) Kariba Hydroelectric Power Station entered scheduled maintenance.

Hwange Thermal Power Station, a 920MW facility, has been beset with generation problems after some key units ran into technical faults over a month ago, the longest such interruption in the past two years.

These setbacks have crippled factories and domestic consumption, compounding the country’s worst economic crisis in a decade.

Confederation of Zimbabwe Industry ex-president Sifelani Jabangwe last week raised concern over intensified power cuts during a period when industries were slowly returning to full-scale operations following pandemic-induced shutdowns.

He pleaded with the state-run power utility to spare industries the blackouts.

“The challenge now is that we have just gone to Level 2, where we were expecting to ramp up production,” said Jabangwe.

“This will affect output unless ZESA deliberately ensures  industry is excluded from load shedding,” he said.

 Power cuts would amplify a crisis that was already piling pressure on the economy long before the COVID-19 crisis broke out last year, forcing government to impose lockdowns meant to prevent the spread of the pandemic.

However, it is not only the pandemic that held back growth in 2020, as foreign currency shortages, which resurfaced in 2019 following a decade of stability, also hit industries hard, while rocketing prices and hyperinflation had already given economic planners and industrialists sleepless nights.

 Once the manufacturing sector stumbles into volatilities, the rest of the economy suffers.

 Other key industries driving Zimbabwe’s economy are tourism and mining, which generate a combined US$4 billion per annum.

International commodity markets witnessed a rise in demand this year, with gold, platinum and chrome reporting sharp rises in demand and prices since January.

Tourism sector remains stagnant in the aftermath of the first three waves of the pandemic, although travel is slowly returning.

Capacity utilisation rose by 11%  to 47% in 2020 from 36,4% in 2019 (due to) improved foreign currency availability, increased sales and re-tooling.

Firms have in the past year been able to access cheaper foreign currency from the auction system introduced by the Reserve Bank of Zimbabwe in June.

Companies have also been kept busy since last year because the local market demanded more domestic products after borders were closed by governments to contain the pandemic.

Economist Victor Bhoroma said that Zimbabwe’s industries could lose production time, leading to derailed capacity utilisation.

“The rolling power cuts for households and industries will have a devastating effect on capacity utilisation by industry,” he said.

“Industry expected capacity utilisation to eclipse 60% in the third quarter (Q3) and Q4 but those hopes are now fading. Industry will lose valuable production time, incur additional energy costs, lose sales and fail to meet orders.

For households, costs of additional energy consumption such as gas will eat into meagre disposal incomes especially for poor families.”

Another economist Enock Rukarwa said it was unfortunate that power cuts were coming at a time when industries were trying to catch up following the adverse effects of COVID-19 lockdown measures, which only allowed a few companies considered as essential services to operate.

“Relative stability on inflationary pressures and exchange rate dynamics have been encouraging lately.

Other critical input factors like electricity fuel needs to be efficiently supplied for the local industry to remain optimistic,” he said.

“On the backdrop of 50% labour force operating remotely, electricity supply bottlenecks will have a huge dent on productivity, thereby affecting the entire economy.”

President Emmerson Mnangagwa, at the commissioning of 200 transformers and 117 vehicles procured by ZESA Holdings recently, indicated that power shortages would end in two 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 the next two to three years,” Mnangagwa said.

“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,” he added.

Zimbabwe requires 1 500MW of electricity per day, down from the 2 000MW in the past due to deindustrialisation.

 Small independent power producers are now contributing 1,75% to local generation with hope that they will increase generation to the grid in future.

Zimbabwe imports electricity from   South African power utility Eskom and Mozambican power entity Hidroeléctrica de Cabora Bassa.

The country is in the process of rehabilitating Hwange Expansion Project for units 7 and 8 and upon completion in 2022, the project will increase power generation from the current 600MW.