Power cuts costing Zimbabwe US$1,2 billion

THE World Bank has urged the government to address the country's energy deficit after estimating that power cuts are costing the economy at least US$1,27 billion annually.

In its fourth Zimbabwe Economic Update report released yesterday, the World Bank said power shortages had stalled economic growth.

"World Bank estimates suggest that Zimbabwe's power shortages cost the country a total of 6,1% of GDP [gross domestic product] 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," it said.

In the pre-budget meetings, Treasury reported that the nominal gross domestic product at market prices was ZWL$119,01 trillion, translating to US$20,8 billion. Thus, 6,1% of that figure is about US$1,27 billion.

The bank said power cuts also had an adverse impact on the productive sector and resulted 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," the lender said.

The World Bank revelations come as power utility Zesa Holdings yesterday said a power grid failure had affected the eastern parts of the country, leaving residents in eastern Harare, Ruwa, Marondera, Rusape and Mutare without electricity.

It said the crisis began on Tuesday when a transmission tower collapsed at Ingwe Farm, disconnecting the critical 330kV line between Warren and Dema substations.

The outage of this critical line led to loss of power to Dema and Orange Grove substation, which supply power to eastern parts of Harare, Manicaland and surrounding areas, Zesa Holdings said.

It said electricity supply was yesterday lost due to a fault on the Mozambique Transmission Grid, which connected to Zimbabwe through Bindura.

The fault caused a limitation on the power system and Mozambique's EDM has limited loading of the line to only 60 megawatts (MW) in the affected area, Zesa Holdings said.

Zimbabwe generates its electricity from Hwange Power Station (thermal) and Kariba (hydro) and the three erratic small thermal power stations in Harare, Munyati and Bulawayo.

Generation at Kariba has been reduced, which has seen the power station generating 300MW daily out of its 1 050MW installed capacity due to low water levels.

The World Bank said power cuts were also hurting the agricultural and agro-processing sectors by undermining irrigation, as well as cold chain and storage facilities.

"Tourism is also affected as hotels, resorts and tourist attractions face disruption of essential services. Overall, these effects translate into lower economic growth and lower household incomes," the bank continued.

The bank said Zimbabwe should avail stable and reliable electricity access if it hoped to achieve the high growth rates needed to move towards an upper-middle-income economy by 2030.

The World Bank report comes hard on the heels of concerns by the Confederation of Zimbabwe Industries and Zimbabwe National Chamber of Commerce (ZNCC) that most businesses were incurring increased costs in seeking power alternatives.

The biggest alternative is the use of generators, which has pushed up costs due to the high diesel costs to run the machines.

The two business membership groups also confirmed that power cuts had cut production time to 60,1% in the last quarter of 2023 from 63% last year, according to ZNCC.

"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 1 950MW in 2022 up to 5 177MW by 2030, driven primarily by growing demand from the mining and agricultural sectors," the World Bank said.

"Achieving universal access by 2030 will require annual connections to increase from 25 000 in 2020 to about 537 000 per year. 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 500MW that would ensure the system can meet growing demand."

The Bretton Woods institution said 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$4,4 billion," the World Bank continued.

Speaking at the launch of the report, Finance, Economic Development and Investment Promotion minister Mthuli Ncube said electricity infrastructure required US$2 billion.