ZESA Load shedding costs Zimbabwe economy USD2.2bn yearly
STAFF WRITER
Multiple business leaders and analysts said crippling power outages are costing Zimbabwe’s economy around US$2.2bn yearly amid revelations that a lot of value is lost through massive network losses and burnt of expensive machinery during the switching on of tools after loadshedding.
This has resulted in production stoppages and output losses to all productive sectors.
The business leaders and analysts concurred that electricity is an enabler to the government and companies’ visions as it stimulates economic growth.
The Confederation of Zimbabwe Industries (CZI) president Kurai Matsheza told this publication that the cost of not having electricity has taken a toll to all productive sectors as they depend on power to function properly.
“Various companies whether manufacturing or mining are using a great deal of working capital for powering their machines hence have tripled the amounts they spend on electricity to power generators. An approximation of over US$2bn yearly may be lost on the cost of not having electricity,” Matsheza said.
“We are having a lot of electricity inspired fire in the industries as many machines are burnt during the switch on. Also, many businesses are losing business due to network failure caused by the load shedding. Some international telegraphic transfers are failing to go through due to network challenges hence companies are having some serious production stoppages due to lack of payments emanating from lack of payments.”
According to World Economics, Zimbabwe’s Gross Domestic Product (GDP) is at US$36bn.
In its latest Zimbabwe Economic Update, the World Bank (WB) said the cost of not having power translates into lower economic growth and lower household incomes.
“World Bank estimates suggest that Zimbabwe’s power shortages cost the country a total of 6.1% of GDP per year, comprising 2.3% of GDP in generation inefficiencies and excessive network losses, and 3.8% of GDP on the downstream costs of unreliable energy.
“If Zimbabwe hopes to achieve the high growth rates needed to move toward upper middle-income status by 2030, it will be critical to realise stable and reliable electricity access. Going forward, peak electricity demand is projected to grow substantially. Achieving universal electricity access by 2030 will require large investments, especially in solar power and grid expansion. Medium-term World Bank projections suggest that electricity demand will grow from 1950 MW in 2022 up to 5177 MW by 2030, driven primarily by growing demand from the mining and agriculture sectors,” WB said.
In 2020, the available generation capacity was 1585 MW compared with peak demand of 1900 MW, forcing power outages of 12–14 hours a day.
While the Government commissioned an additional 600 MW at the Hwange power station in 2023, installed capacity is currently still insufficient to meet demand, and rolling blackouts give rise to a significant burden on Zimbabwe’s economic growth and competitiveness.
Zimbabwe has seen notable improvements in access to electricity, but the pace of rural electrification has slowed down. Between 2014 and 2020, overall energy access expanded from 32 to 53%, driven by a rapid rise in access in rural areas (from 8 up to 37%).
Nonetheless, the overall pace of expansion is slowing and there is a need for significant investment to achieve universal access by 2030.
Despite recent achievements, Zimbabwe’s electricity sector still faces power supply deficits and slowing progress toward universal electricity access.
“Power shortages have a significant adverse impact on the productive sector and result in higher costs for Zimbabwe’s economy. Electricity deficits are particularly damaging for the mining sector, given its highly energy-intensive characteristics, so that unreliable and expensive electricity supplies reduce the margins of existing operations and weigh heavily on the feasibility evaluations for expansions and new projects.
“Power shortages also significantly hurt the agriculture and agro-processing sector by undermining irrigation, together with cold chain and storage facilities. Tourism is also affected as hotels, resorts and tourist attractions face disruption of essential services,” WB said.
In the state of the mining sector survey, mining executives said fragile power supply coupled with increasing demand from new and expansion projects will demand additional power.
“Risk of power outages will result in production stoppages and output losses,” miners said.
The World Bank said the government has set itself ambitious targets for 2030 to ensure reliable energy supply and significantly expand electricity services to most of the population.
The National Energy Policy 2012 initially aspired to achieve universal access by 2030 (GoZ, 2012), and its Vision 2030 aims to significantly improve electricity reliability and expand households’ access to electricity.
“Estimates for least-cost generation expansion indicate that, in the short-to-medium term [2024–26], utility scale home solar systems would be the fastest units to provide additional capacity, adding more than 1 500 MW that would ensure the system can meet growing demand. Subsequently, generation expansion efforts would comprise gas power plants and hydropower, in addition to more solar.
“The associated grid network expansion to 2030 is estimated to cost a total of US$4.4bn. The Government is planning to expand electricity access through various sources, but it remains unclear how the investment needed will be financed. The biggest planned increase in electricity supply comes from the Batoka Gorge Project along the border with Zambia [1,200 MW for Zimbabwe] projected for completion after 2034, and the Devil’s Gorge [1,200 MW] to be completed by 2040,” WB said.
It said this is complemented by additional energy projects in solar, wind, mini-hydro and geothermal.
The National Renewable Energy Policy of 2019 is targeting an additional 2,100 MW by 2030 from renewables, mainly solar PV and this would be complemented by storage at the Kariba reservoir and battery energy storage systems, according to the WB.
The World Bank posited that Zimbabwe’s interconnected problems of electricity supply and access are ultimately driven by three underlying issues:which include weak financial performance of energy companies, insufficient central planning and coordination, and limited private sector participation.
The weak financial state of Zimbabwe’s electricity companies (ZESA) is the most significant issue driving the country’s power supply deficits and slowing the expansion of universal access to electricity services.
Energy tariffs, experts said, do not reflect the financial costs of energy generation and distribution, leading to significant losses for power companies. and is complicated by the inefficiencies of the utility companies.
“Energy companies are also burdened by high debt servicing costs. Insufficient revenues and high debt lead to cash flow shortages, which in turn constrain the companies from investing in new generation, transmission, and distribution assets, including in access expansion, attracting private sector investment and commercial financing for the sector’s investment plan as well as adequately maintaining existing assets; and forcing them to (iv) consistently import power from neighboring countries to satisfy electricity demand,” reads part of the statement.