Resurgent power outages to gnaw at growth targets

THE power outages currently besetting the country are set to derail economic growth prospects at a time the economy is already reeling from Covid-19.

Zesa has imposed rolling blackouts that are compounding the country's economic crisis. Although these outages are not as severe as the daily power cuts which lasted up to 18 hours a day in 2019, the power cuts are a cause of concern for industry which has been hard hit by the pandemic.

This is despite assurances from energy authorities and Zimbabwe Energy Regulatory Authority (Zera) officials that the country had adequate power to stamp out load shedding. Economist Moryden Moven points out that the power cuts will bring about more economic misery and dent growth projections.

"It will definitely slow the recovery prospects as predicted by the Treasury, World Bank and International Monetary Fund (IMF). They all generally agree to economic recovery this year. Apart from power shortages, there are also major challenges such as Covid-19, forex shortage and policy inconsistency. In a developing country like ours, power is one of the major economic essentials," Moven said.

The IMF recently almost doubled its economic growth forecast for Zimbabwe, citing a bumper harvest, improved power supply and an increase in manufacturing and construction. The Bretton Woods institution expects the economy to expand "by about 6%" this year.

This is close to the government's growth projection of 7,4%. The World Bank has put this year's Gross Domestic Product (GDP) growth at 3,9% this year, underpinned by a good agricultural season and an inflationary slowdown.

Power cuts could also increase inflationary pressures which dropped to 56,7% in July, and projected by monetary authorities to fall below 10% by year end. Inflation reached a post-dollarisation high of 856% in July last year. Labour and Economic Development Research Institute of Zimbabwe economist Prosper Chitambara raised concern over increased power cuts highlighting they increased the cost of doing business.

"Power shortages slow down economic recovery and increase cost of doing business as businesses have to resort to back up/ alternatives," Chitambara said.

His assertions were in sync with economist Takudzwa Chisango who indicated that use of alternative power sources would drive costs thereby prompting another bout of inflation.

"This will ultimately have a cost-push effect on prices as industry will resort to other high-cost alternative sources of energy to power their operational activities. So given that petrol and diesel powered generators are the immediate alternative energy source, if the obtaining situation remains unaddressed we will definitely experience a bout of inflation permeating in the market coupled with production inefficiencies," Chisango said.

Power shortages derail industry production. Last week, sugar manufacturing entity, Hippo Valley, said overall cane deliveries from the plantations and private farmers were impacted by power challenges. Economist Victor Bhoroma said the deepening power cuts were gradually crippling various sectors of the economy, especially service industries and affecting household consumers who Zesa relies on for its cash flows.

"The economy is slowly losing valuable production time and potential output at a time the country is recovering from successive tears of decline. The power cuts pose a serious threat to economic resurgence," Bhoroma said.

President Emmerson Mnangagwa at the recent commissioning of 200 transformers and 117 vehicles procured by Zesa Holding indicated that power shortages should end in two years' time.

"Minister of Energy and Power Development (Zhemu Soda), I want that in this country, after two years, maximum three years. We should have all the energy we want and no one should be able to spell the word 'load shedding' in the next two to three years," Mnangagwa said.

"In addition, these interventions will consolidate stability of the electricity supply system, reduce technical losses and bolster power supplies within the Southern African Power Pool transmission grid. Meanwhile, the Integrated Energy Resource Master Plan must be speedily completed."

Zimbabwe currently requires 1 500MW of electricity per day, down from the 2 000MW in the past due to de-industrialisation.

Small Independent Power Producers (IPPs) are now contributing 1,75% to local generation with hope that they will increase generation to the grid in future.

Zimbabwe imports electricity from South African power utility Eskom and Mozambican power entity Hidroeléctrica de Cahora Bassa.

The country is in the process of rehabilitating the Hwange Power Station Units 7 and 8 and upon completion in 2022, the project will increase power generation from the current 600MW to 1 200MW. The power station has a capacity of 900MW but is currently generating 600MW.

Zesa hiked power tariffs by 30% in May after indicating that the then existing tariff had become sub-economic.

The power outages come at a time when 500 000 Zimbabweans have lost their jobs since the Covid-19 pandemic broke out last year igniting de-industrialisation, according to the World Bank.

In its report titled Zimbabwe Economic Update (ZEU): Overcoming Economic Challenges, Natural Disasters, and the Pandemic: Social and Economic Impacts, the global lender said Covid-19 affected rural and urban jobs with 7,9 million people living in abject poverty.