Zimbabwe Power Crisis; Government Paying The Price of Procrastination

HARARE – In September 2005, directors of the newly established Zimbabwe Energy Regulatory Commission (ZERC), met former Vice President Joyce Mujuru to lay out their game plan.

The mandate of ZERC, (today’s Zimbabwe Energy Regulatory Authority, ZERA) was clear. It was coming in to help liberalise the power sector and end State – run ZESA Holdings Limited’s long-held monopoly.

It had a clear mandate to review the petroleum sector, which revolved around government’s National Oil Company of Zimbabwe (NOCZIM), which was the biggest importer during the period when our market required a combined three million litres of diesel and petrol per day to fire industries and drive commerce.

Things have completely changed today. According to the Zimbabwe Revenue Authority, the market guzzled 1,06 billion litres of diesel and 570,12 million litres of petrol last year, which translates to four million litres a day.

I return to the petroleum crisis later. For now, I will talk about Mrs Mujuru’s crucial meeting with ZERC 14 years ago when, in a frank analysis uncharacteristic of State enterprises, commissioner general, the late Mavis Chidzonga, warned government to brace for crippling blackouts within 36 months.

Government was already aware of the crisis that was impending. ZERC only provided the vital statistics to amplify what a string of experts and industrialists had already said.

Chidzonga was categorical in her briefing to the VP, warning her of rolling blackouts and an industrial crisis in the country unless decisive and well thought- after policies were rolled out to drive private capital into power generation.

Ending the ZESA monopoly had long been debated, but as always, government had preferred to stick to command economics, even after taking extraordinary lessons from privatisation of firms like Dairy Marketing Board, today’s Dairibord Holdings, and the Bank of Commerce and Industry, today’s CBZ Holdings Limited.

ZERC warned that red lights were flickering, and time was running out, as ZESA alone lacked the capacity to power industries and commerce.

From 2008, Mrs Mujuru was told, a power crisis of immense proportion would rattle the markets.

Power imports from South Africa, Mozambique, Zambia and the Democratic Republic of Congo would either be stopped or become erratic as regional would direct transmission to domestic consumption as a result of rapid, uninterrupted industrialisation.

Zambia, riding on a copper price boom, was rebuilding closed mines in the Copperbelt. The outlook for Mozambique, where global resources firms were eyeing rich coal reserves, was good.

Today, FDI into Mozambique is among the highest in SADC, with US$2 billion flowing annually. I am not surprised that Hidroelectrica de Cahora Bassa (HCB), has reduced exports into Zimbabwe because the big players have arrived in Maputo, and the economy has scaled up its appetite for energy.

We all know the huge leap that has taken place in South Africa in the past decade, and the implications on Eskom’s capacity to export.

An economic crisis now entering its 20 straight -year was in its infancy in Zimbabwe 14 years ago. Zimbabwe was importing 35 percent of its power requirements.

This figure rose to 50 percent around 2006 as ZESA’s problems escalated, before retreating to current levels of around 35 percent, albeit into a significantly shrunk marketplace due to massive de-industrialisation.

ZESA is battling foreign currency shortages, frequent breakdown and huge outstanding payments from customers – the same problems that held it back at the height of hyperinflation in the mid-2000s.

The power utility is owed over $1 billion by unpaying customers.

What Zimbabwe required, as advised by ZERC in 2005, was the immediate liberalisation of the power sector, which would be undertaken without whole heartedly, with deliberate strategies towards meeting interested investors halfway in terms of taxes, fees and other costs.

The Zimbabwe Stock Exchange listed RioZim was already developing a 250MW coal fired power plant at Sengwa, and was making all the efforts in a volatile environment that was replete with currency shortages, high utility costs, and frequent currency changes in a hyperinflationary rage – the ingrediencies that can dampen and vision, no matter how brilliant.

In my opinion, RioZim director’ did not give up, and have remained determined to power Zimbabwe many years after extraordinary foresight told them the country would require independent power producers (IPPs) to completement ZESA’s efforts.

With full, unconditional strategies like duty exemption to RioZim, Zimbabwe’s story would be completely different today, as its entry was sure to encourage more investment into flow into power generation.

The Zambians encouraged Copperbelt Energy to flourish. Even though they face a power crisis like Zimbabwe today, their troubles are less pronounced.

For various reasons, including extortionist taxes, and high costs, a weak financial sector and a high-country risk, the Sengwa plant remains a pipedream, and RioZim is still singing the same tune 15 years on.

ZERA has licenced 70 IPPs most of which are yet to come on stream. But emotions are running high in government, which is threatening to revoke licences of producers that have failed to kick start their projects to complement ZESA, which has the crucial task to transmit 2 200MW that industries require.

It would be important to look at the reasons behind delayed investments. Government should then iron out their concerns and move forward. Threats and punishments have never worked anywhere.

In a progressive response to the crisis that confronts Zimbabwe today, government in 2013 facilitated Chinese loans to expand generation capacity at the Kariba Hydroelectric Power plant at a cost of $553 million.

An additional 350MW came on stream in 2018 taking generation capacity 1 050MW. Yet in this well intended intervention, priorities were misplaced, and resources were directed wrongly.

This huge financial outlay from China should have been channelled towards building fresh capacity at the 920MW thermal power station at Hwange.

Hwange, in my opinion, is less prone to the vagaries of climate change – the recurring droughts. Government was fully appraised of the threats that climate change posed to the global economy when it signed the Kariba deal in 2013.

As fate would have it, today, the power station that carries the hopes of a troubled economy is facing the threat of decommission if rains fail again.

A fresh deal worth US$1,5 billion has been clinched with the Chinese again. And Hwange is undergoing a complete facelift. It is a job well done! But this may be too late.

Industries are enduring up to 18 hours of rolling blackouts, and domestic consumers are feeling the heat, too. The droughts are not only affecting energy generation, but food security, too.

When governments are faced with the choice between importing food to averting starvation and funding power imports to save industries, they are likely to choose food.

This is how today, power imports have been erratic, threatening about 855 000 formal jobs, and millions informal sector workers.
The good news is that government, after misdirecting efforts six years ago, did not sit down and rest.

Many initiatives are underway, including solar power projects. These problems have been compounded by the fuel crisis that has rattled the markets for over a year now.

Again, government procrastinated in liberalising the fuel price to capacitate importers. By the time these mistakes were identified, tremendous damage had already been inflicted, and firms were teetering.

Perhaps, with ongoing reforms, fuel will seamlessly flow in soon, and rolling blackouts will be addressed.

But the huge lesson to take away from this crisis, in my view, is that procrastination can roll back any efforts that are in place to rebuild Zimbabwe.