Power deficits dog Zimbabwe, SA and now Zambia

Governments in the region needed to come up with longterm plans to avoid such disturbances…

FIRST it was Zimbabwe, then South Africa and now Zambia. It seems there is no end in sight for the region’s power woes, with power deficits still looming large for the shortand medium-term outlook, although power utility executives in the region say the situation will improve.

Electricity cuts are hobbling the region, stifling productivity in key sectors such as mining and manufacturing and now Zambia, the latest to be affected by the power cuts, is bracing for lower gross domestic product (GDP) this year, with fund managers and economists blaming this on poor planning.

A fiscal deficit has forced the government to implement programmes aimed at cutting non-essential expenditure.

Zambia is Africa’s second largest copper producer and a key agricultural hub following disruptions in Zimbabwe after the government embarked on a land reform programme in 1999.

The Bank of Zambia said this week that it welcomed “these actions by the government, as fiscal consolidation along with monetary policy action will support macroeconomic stability and growth”, although experts insist that power cuts should be addressed first to help the economy recover production losses.

Bruce Williamson, the Africa resource fund manager for Imara, told Business Report that governments in the region needed to come up with longterm plans to avoid such disturbances to economic activity.

Zimbabwe, Zambia and South Africa were resource heavy economies and disrup- tions to mining productivity – further worsened by persistently lower commodity prices – was affecting economic performance, economists said.

“Bad and ever-changing policies by government are bad news. The problem with power shortages or cuts is that miners invariably can’t plan for such cuts,” Williamson said.

Zambia’s central bank governor, Denny Kalyalya, said last week that “initial indications are that GDP is going down” as a result of the power cuts.

Companies in Zambia, just like in Zimbabwe and South Africa, have had to resort to high voltage generators, while sustaining lengthy non-productivity of up to 8 hours during periods of power cuts. “This is quite a serious matter on the economy. So we are challenged as a country,” Kalyalya said.

PwC said in a report last week, which surveyed 51 senior power and utility sector executives from 15 African countries, that they had expressed continued concern about some of the immediate risks to the power system in the region. However, the executives surveyed were also optimistic about the longer-term prospects for electricity in Africa.

“Security of electricity supply and cost reflective tariffs continue to be the number one challenges. Until they are resolved, power systems will remain stretched, as investments in the power sector will be limited,” Angeli Hoekstra, the Africa power and utility leader for PwC, said.

The report highlights consensus among surveyed power utility executives that power companies will need to change their business models to respond to energy transformation.

About 80 percent expected that future power utility business models would be transformed by 2030. A quarter of respondents to the PwC survey said the long-term outlook would be constituted by power utilities running on a different model from the establishment.

Williamson said it was important for governments in Zimbabwe, Zambia and South Africa to “think and plan 30 to 50 years ahead and plan” to avoid crippling situations such as the current power cuts.