Zimbabwean businesses are once again counting the costs of electricity outages as low water levels at the Kariba Dam have resulted in reduced power generation while frequent breakdowns at the coal thermal powered Hwange have hammered economic productivity.
Zimbabwean companies, including big miners and manufacturers as well as large scale agricultural firms, are enduring power outages of up to 18 hours a day. A similar situation is also happening in neighbouring Zambia, which also relies on Kariba Dam for most of its power generation.
Despite a promising 2024/2025 agricultural season premised on normal to above-normal rainfall forecasts, the power outages afflicting Zimbabwean economic players could negate productivity. Mining companies, including units of Impala Platinum, Anglo American Platinum and Sibanye-Stillwater, have also been losing production time and revenue due to the power outages.
“Power outages are one of the key constraints, with a recent survey by the Chamber of Mines indicating that miners have lost $500 million (around R8.8 billion) of potential revenue due to power outages in 2024,” said Lloyd Mlotshwa on Friday, lead analyst for IH Securities.
Some of the Zimbabwean mining companies have had to sign up for costly electricity imports from regional suppliers.
“Power outages have persisted owing to frequent breakdowns at Hwange power station and low water levels at Kariba amid drought conditions. Business operations continue to be disrupted and alternative power sources have exerted cost pressures on them,” explained Mhlotshwa.
Matts Valela, chairman for spirits and wines manufacturer African Distillers (Afdis) in which Distell has a stake, last week also cited electricity supply constraints as weighing down Zimbabwe’s economic productivity prospects.
He said “the current limited access to foreign currency, and erratic power supply will continue to present challenges” for the wines and spirits maker.
Nonetheless, Valela believes the “forecast normal agricultural season, increased activity in mining, tourism, and infrastructural development are expected to boost economic activity” in Zimbabwe.
Apart from the power supply deficit that Zimbabwe is experiencing, IH Securities said current “high electricity tariff, pegged at about $0.14 cents per kilowatt hour and a peak tariff of about $0.19 per kilowatt hour “continues to exert cost pressures” on industry players.
“The cost is even higher during power outages, where diesel powered generators are used as a backup, with an implied tariff exceeding $0.30 per kilowatt hour,” said the securities research company last week.
As companies and businesses count the impact of the power outages, it has emerged that mining sector will be among the hardest it. Due to the power outages, Zimbabwe’s mineral revenues are forecast to fall by as much as 10% this year to $5.5bn.
To mitigate the blackouts, Zimbabwe is pushing for independent power producers to come on stream, with various small solar power plants being developed. Additionally, a $3.6bn energy industrial park in Beitbridge is under construction as a joint venture between the Government of Zimbabwe and Chinese mining firm Palm River Energy.
The project includes the construction of a 1 200MW coal-fired thermal power plant, with 50MW expected in the currently ongoing phase 1 of the project.
BUSINESS REPORT