Forex shortage hampers Zimbabwe power imports

ZESA says it has not started planned power imports from the region to plug a yawning domestic supply gap due to shortage of foreign currency required to pay suppliers.

Executive chairman Dr Sydney Gata told our Harare Bureau in an interview that the State power utility has failed to access foreign currency from the Reserve Bank's weekly auction market.

He said it was strange the power utility could not be given its requirement of US$17 million monthly to import the power despite the country raking in nearly US$10 billion last year.

Zimbabwe faces a crippling power supply deficit due to limited local generation capacity given one of its major power plants, Hwange Power Station, can now only manage half its design potential.

Last year, Dr Gata said the country needed to import between 200MW and 400MW to close the domestic supply deficit, although this should not necessarily be the case.

The country's other power sources, three thermals in Harare, Munyati and Bulawayo, just like Hwange are also prone to breakdowns as they have outlived their useful life and await major upgrades.

While Zesa could ramp up production to optimum capacity at 1 050MW Kariba South hydro plant, the plant's contribution is also limited by the amount of water allocated to it by a regulator taking into account the sub-optimum dam water level.

As of yesterday afternoon, Kariba South was churning out 881MW and Hwange, which has installed capacity of 920MW, was only producing 404MW.

The southern African country requires 1 800MW to 2 200MW at peak periods of demand, but is able to produce an average of 1 400MW, at best.

Zesa had planned to start imports by December last year to close the supply gap while it waited for the commissioning of Hwange Power Station Units 7 and 8, which will add 600MW, to be commissioned.

The expansion project, being carried out by China's Sinohydro, has reached an advanced stage, but the first unit may not be completed by June this year, as initially planned.

Energy and Power Development Minister Zhemu Soda indicated recently he expected the first generation unit to come on line in October this year and the last in the first quarter of 2023.

Both generators were scheduled to start feeding the national grid by October this year, but the initially scheduled completion time was delayed by Covid-19 restrictions globally.

This means Zesa needs to import from the region to bridge the supply gap until the new generators being built in Hwange finally start feeding the national grid.

Dr Gata said contracts for potential supply of power from regional utilities were already in place, but the plans to receive supplies from Mozambique and Zambia had not progressed beyond the agreements due to forex challenges.

"The forex to import the power has not been made available.

We negotiate import contracts (from Mozambique and Zambia) pending the completion of Hwange 7 and 8.

"We require forex to pay for the electricity.

"The agreements are still in place.

We are pursuing other means (to get the funding), through market restriction.

We are negotiating with some companies," Dr Gata said.

He said it was puzzling how Zesa could not be prioritised in the allocation of foreign currency at the auction given the centrality of power for all economic activities in the country.

"They just cannot not help us," he said.

"We require US$17 million a month to pay for the imports, but we wonder how we cannot get that in a country that received US$9,7 billion in 2021 alone."

Crippling power shortages in Zimbabwe have over the last decade and half negatively affected commercial, industrial and household activities since Zesa often has to implement long periods of load shedding to balance up demand and supply.

Dr Gata said late last year the country's Treasury had failed to sign an independent power producer (IPP) implementation agreement, which would speed construction of power projects and increase Zimbabwe's power output capacity.

Meanwhile, the Zimbabwe Energy Regulatory Authority (Zera) says it will take a cautious approach when reviewing electricity tariffs to prevent unintended consequences on the economy.

The power tariff, last reviewed in January this year, has become uneconomic and the power utility, Zesa, has already approached Zera seeking a power price adjustment.

Electricity is one of the major cost drivers in production processes and service provision.

In a recent interview with our Harare Bureau, Zera chief executive Mr Eddington Mazambani said the regulator was studying the recommendations by the World Bank on the power tariff, and would propose a "pathway" of moving from a non-economic to an economic tariff regime.

"We are studying the recommendations by the World Bank but it is something that we will implement over time to prevent unintended consequences on the economy," said Mr Mazambani.

Even countries that adopted the World Bank recommendations did it gradually, so it may take maybe three years," he added.

Electricity has become the cheapest energy for households over other sources such as gas, with an average household spending as little as US$10 for electricity per month.

The last power price review was in January 2022 when Zera approved an increase of tariffs by 12,3 percent.

Families on pre-paid meters are buying 200 units per month for $1 265,11 (US$5 on the parallel market or US$9 at official exchange rate) including the six percent rural electrification levy.

There are five bands of discounted tariffs before the full $14,31 a unit comes into effect on purchases over 400 units.

The first 50 units cost $2,38 each, before the rural levy.

The 50 units are considered the bare minimum that a family of five needs for essential purposes.

Consumers on post-paid meters pay similar charges plus $35,68 monthly fixed charge.