Nation faces another wave of power cuts. . . low revenue hits Zesa Holdings

Zimbabwe may experience potentially devastating power cuts in the next few weeks after coal miners threatened to stop supplies to power utility, Zesa Holdings over a debt of at least $600 million (about US$7,2 million).

Economists warned that failure to deal with the situation would further cripple factories and mines already suffocated by the impact of Covid-19.

Zesa has warned of power rationing, probably for the first time in six months, due to technical faults at its 780 megawatt plant and Kariba hydroelectric plant which have affected output as well as subdued imports.

Hwange is the country’s second largest power plant after Kariba plant.

Already, some small thermal power stations (Harare, Munyati and Bulawayo) have been on and off due to coal shortages.

Coal Producers Association (CPA), a lobby group that represents the interests of local miners told Business Weekly of the “dire situation”, warning severe disruptions of supplies were inevitable since Zesa was failing to pay them “for some months now”.

“Cumulatively, we are owed at least $600 million and Zesa keeps telling us that they
can’t pay because of the sub-economic tariff (they are charging electricity consumers),” Ray Mutokonyi, the chairman of CPA said in an interview.

“But this has left us in a very tight situation. We have no working capital and in no distant time, we might be forced to stop supplies.”

He said producers would engage the new Minister of Energy and Power Development Zhemu Soda over the matter.

“We have been engaging and we will continue engaging.”

Minister Soda said the Government was consulting all relevant stakeholders to come up with a viable solution.

“It is correct that there is need to kind of cushion the coal miners and also look at cost reflective tariff but that has to go through a process of consultation”, he said.

Hwange unit 5 has been out and works are at an advanced stage to recover it, while Unit 2 developed tube leaks, Zesa said in a statement this week.

Unit 8 at Kariba is out of service due to a technical fault.

Tariff dilemma

In July this year, Zesa reduced electricity tariffs by between 11 percent and 25 percent and introduced a new low-cost tariff band that lowered charges for units in excess of 200 kilowatt hour (kwh), albeit not exceeding 300kwh per month.

The first 50 units cost 52c per kwh, 51 to 200 units cost $1,14 per kwh while 201 to 300 units are priced at $3,12 per Kwh. The premium band for the purchase of units exceeding 300 costs $4,88 per kwh.

“I think there is justification to increase the tariff given that their overheads continue increasing due to the depreciation of local currency since the introduction of the foreign currency auction system,” said Silas Rukono, an analyst with a local energy research firm.

“The current tariff structure was approved when the (exchange) rate was fixed at 25. However, the costs of coal and other overheads have gone up by more than 200 percent over the past two months and this makes the current tariff regime uneconomic.”

However, some observers say government may find itself in a dilemma of protecting the citizens from the vagaries caused by the global pandemic of coronavirus, which has destroyed livelihoods of many while at the same time ensuring the viability of Zesa.

“Unless they come up with a form of subsidy, it is going to be hard,” a development economist with a local university said.

“Even at the current tariff level, we have so many families who are struggling to pay. Incomes of the majority of Zimbabweans whose economic activities are largely informal have been disrupted due to Covid-19 pandemic. It’s a catch 22 situation.”

Since March this year when government introduced lockdown restrictions to combat the spread of coronavirus, there was reduced demand that resulted in uncharacteristically reliable electricity.

A recent Government report revealed industrial capacity utilisation has been badly affected in the past few months due to lockdown restrictions.–

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