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Power blackouts force Zimbabwe firms to shut down

by Staff reporter
19 Jul 2019 at 07:57hrs | Views
Zimbabwe's economy could grind to a halt if power outages gripping the nation persist as production plunges, exports decline, companies lay off staff and disposable incomes shrink, after it emerged that manufacturing companies are going for up to 18 hours without electricity.

Industry, already operating at half its installed capacity and reeling from low efficiencies associated with antiquated equipment and low production, is becoming even less competitive.

Zimbabwe Congress of Trade Unions president Peter Mutasa said workers are facing the threat of job losses as a result of power outages. "It is a real crisis. Many workers are facing job losses," Mutasa told the Zimbabwe Independent last night. "Many workers are being forced to go on unpaid forced leave because there is nothing for them to do as a result of the power cuts. We are going to see widespread job losses unless the situation is mitigated."

Although the introduction of a new currency that is relatively weak against the US dollar had given manufacturers an incentive to look for new export markets, the power blackouts are shrinking exports and worsen the forex crunch.

Apart from this, companies are incurring losses running into millions of dollars with some firms on the brink of closure in stark contrast to President Emmerson Mnangagwa's mantra that the country is open for business.

Foreign currency shortages, recurrent breakdown of aged equipment, debt and severe reduction of water levels at Kariba Power Station have contributed to the energy crisis in the past couple of months.

Zimbabwe imports electricity from neighbouring Mozambique and South Africa. Owing to an acute foreign exchange shortage, the country has failed to retire debts to South African power utility Eskom and Mozambican power entity Hidroel├ęctrica de Cahora Bassa.

Zesa Holdings' failure to honour its obligations to the foreign suppliers has occasioned the drastic power cuts.

Eskom cut the power it sells to Zimbabwe from 450 megawatts to a mere 50 megawatts. Government recently paid US$10 million to Eskom to help facilitate talks for power supply to be restored.

Zimbabwe was producing 917 megawatts of power as of yesterday against a capacity of 1 800 megawatts.

Confederation of Zimbabwe Industries (CZI) president Henry Ruzvidzo said the power cuts have crippled industry and are a major threat to its ability to export.

"The power cuts have affected business severely. The loss of revenue runs into millions," Ruzvidzo said. "In some cases export orders are under threat due to lack of performance. The situation calls for urgent solutions before irreparable damage occurs to our fledgling industries. Discussions with Zesa and the Ministry of Energy are in progress to find both short and long-term solutions."

Confederation of Zimbabwe Retailers president Denford Mutashu painted a grim picture of the state of the retail sector as a result of the power cuts.

"The power outages are ravaging the sector. The impact has been so drastic especially for those retail outlets operating outside the central business district," Mutashu said.

"Some retail outlets have generators but are struggling to find fuel. You cannot have a situation where both fuel and power are not available. This has affected machinery as well as the till points."

Mutashu pointed out that some shops have closed their bakery and delicatessen departments as a result of the power outages. He revealed that shops have also reduced the purchase of perishables such as milk and cold meats for fear of incurring further losses.

"Retail outlets are incurring huge losses such that some are sending workers home until the situation improves as they come to work to just sit and do nothing," Mutashu said. "We are now bearing the brunt of the corruption at Zesa and government's failure to invest in alternative energy."

Mutashu said they are still quantifying the total losses caused by the load shedding but said the losses would run into millions of dollars. He said negotiations with Zesa over the issue have not been helpful as they have not resulted in the immediate end of power cuts.

Employers Confederation of Zimbabwe acting president Israel Murefu said the power blackouts have had an adverse impact on business.

"The power outages have had a devastating effect on business. You get power at 10 in the evening and it goes around 4 in the morning, meaning we have to use generators but generators are supposed to be for emergencies and not for everyday use. It is not sustainable by any means," Murefu said. "If a company was operating at 40% capacity before the power cuts, can you imagine at what capacity it is operating at now. We have noted that companies have reduced their head count and are operating well below capacity."

Companies such as Waverley Blankets based in Graniteside are contemplating closure.

"There is no light at the end of the tunnel. We have been severely affected as a sector, and it (Zesa load-shedding) has affected our operations," Waverley Blankets administration manager Doreen Eeson said.

"We are likely to be forced to close our doors."

A printing company in the Graniteside industrial area in Harare has decided to shut shop until the electricity situation improves putting the jobs of more than 70 workers at risk.

"We cannot operate under these conditions. I cannot ask staff to start work at 10pm and finish at 4am when electricity is available," the printing company owner said. "I cannot run a generator the whole day at a cost of 20 litres per day and service charges of ZW$4 300. It is just impossible, so we will have to close and wait until electricity is restored to an extent of allowing us to operate normally."

He said it is not only the monetary loss but also the social implications of the power blackouts.

"The actual loss cannot be quantified just in monetary terms. I have two pregnant senior employees. How do I put a value on them failing to pay maternity fees?" he said.

Industry deputy minister Raj Modi came face-to-face with the impact of power cuts at cooking oil manufacturer, Surface Wilmar.

Ordinarily, the company produces 8 000 tonnes of cooking oil per month, but company executives told Modi this week during a tour of the company's plant that output had slumped to 1 500 tonnes.

"There is no production. As you went through the factory, did you see workers there? Did you see the factory running? For the last 16 to 17 days, there has been no production here," Surface Wilmar executive chairperson Narottan Somani said during the tour.

Some companies are spending up to ZW$100 000 monthly on diesel for generators as the crisis worsens.

The farming sector has not been spared the impact of load shedding.

"We have not done a full analysis of this situation but I can confirm that there are heavy losses in the wheat sector which are being caused by these prolonged power cuts," Zimbabwe Farmers' Union executive director Paul Zakaria revealed.

"We had a meeting with our provincial and district officers and the situation on the ground is that farmers that rely on irrigation are really suffering due to persistent power outages and this is seriously decreasing production."

The mining sector has also borne the brunt of the nationwide power deficit with production statistics for the first four months of 2019 showing that all key minerals recorded output declines of not less than 10% compared to the same period in 2018 due to power outages. Mining companies have bemoaned the power cuts, which have resulted in them going between four to seven days without power. This has increased the use of generators.

"The use of diesel generators, which are expensive to run, has led to an increase in the cost of production impacting negatively on the viability of the mining industry. The immediate implication of this is a decline in foreign exchange earnings from the mining industry and, if the situation is not resolved, we will witness some marginal mines closing their operations in the next few months," immediate past president of the Chamber of Mines and Bindura Nickel Corporation managing director Batirai Manhando told the Zimbabwe Independent in a recent interview.

As a result of the dire state of affairs, the government has directed that the mining sector and hotels in Victoria Falls pay their Zesa bills in foreign currency despite phasing out the multi-currency regime last month through Statutory Instrument 142 of 2019.

Economist Prosper Chitambara said the current power outages will deter investment which the country desperately needs.

"The power outages are an increase on cost of doing business. Most businesses are relying on using generators which is expensive. There has been a significant reduction in production," Chitambara said, "Investment prospects have been affected. Energy is attractive to investors. If there is no energy, who would want to invest?"

Source - the independent

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