Zesa on brink of collapse

ZIMBABWE risks sinking into a deeper power crisis amid reports that the country's power utility Zesa is on the brink of collapse due to an unsustainable tariff regime, NewsDay has learnt.

The power utility is also said to be drowning due to a US$37 million legacy debt, mostly caused by mining companies, revenue leakages, corruption and mismanagement over the years.

Government has insisted on unsustainable tariffs, largely to avoid a public outcry as the country heads towards the 2023 polls.

Currently, Zesa charges the equivalent of US$0,02 per kWh versus generation and import costs of between US$0,09 and US$0,11/kWh.

Industrialists yesterday suggested that the power utility should increase tariffs to guarantee availability of power to industries.

Miners, farmers and manufacturers have been depending on diesel during power outages that can last up to 18 hours.

Some companies such as Caledonia's Blanket Mine, Zimbabwe Consolidated Diamond Company and Tanganda Tea Company have come up with alternative power sources such as solar plants, which have cost them millions of United States dollars to set up and maintain.

Information gathered by NewsDay yesterday indicated that Zesa has applied for a tariff review, but the government was yet to approve it.

Finance minister Mthuli Ncube said the country would have a cost-reflective tariff this year, but there is yet to be any movement in that regard.

Analysts yesterday said without a sustainable tariff, Zesa could sink.

Economist Eddie Cross said: "Any measures by the government which require State-owned corporations to sell a product or service on the market at below production costs must be abandoned immediately as it automatically undermines the ability of the parastatal to be sustainable. With this situation, Zesa's future is doomed because it won't be able to borrow money or secure a future of production and that is exactly the same problem being faced by South Africa."

Former Energy minister Fortune Chasi said Zimbabwe urgently needed a cost-reflective tariff to save Zesa from collapse and to avert an electricity crisis.

"However, the new tariff should neither be inflated by greed and corruption nor legacy issues. The cost-reflective tariff is essential, but factors building up the overall cost must be justified, in other words it must be justifiable in reflecting the cost of generating or importing electricity, not something that is because of premiums arising from corruption and mismanagement," Chasi said.

Zesa had not responded to questions from NewsDay at the time of going to print.

But indications were that the parastatal was in distress after it recently extended a begging bowl to big miners constituting a group called the Energy Intensive Users Group to provide off-take guarantees in hard currency for joint access to power as electricity shortages wreak havoc in the country.

This was revealed recently at the Zimbabwe International Trade Fair by the Zimbabwe Electricity Transmission and Distribution Company (ZETDC) chairperson Howard Choga, who said ZETDC was owed in excess of $1 billion by commercial and domestic consumers.

The power utility currently needs about US$2,5 billion to end load shedding and was battling to get its monthly foreign currency requirements of US$17 million from the central bank to import electricity.

The country has a power deficit of about 1 600MW.