Energy investments to aid industry’s capacity utilisation

INVESTMENTS in electricity supply and continued investments in the energy sector are expected to greatly improve the power supply situation that will aid industry capacity utilisation to 60 percent in 2024, according to IH Securities.

In its 2024 equity strategy report, IH said this comes as the manufacturing industry in 2023 saw a marginal uplift, registering a 2,2 percent increase from the 1,6 percent registered in the prior year.

“According to the Confederation of Zimbabwe Industries (CZI), operations continued to be hamstrung by electricity deficits and prolonged hours of power blackouts. However, aggregate capacity utilisation remained buoyant, gaining 70 basis points in the year to 56,8 percent,” reads the report.

The report highlighted that in 2023, the paper, printing and publishing subdivision saw the greatest increase in output at a 14 percent uplift, while production of non-metallic mineral products and chemical and petroleum products followed, growing by 6,2 percent and 4,5 percent, respectively.

IH noted that electricity generation remained depressed in 2023 on account of extreme weather events, affecting hydroelectric power.

It said the US$1,5 billion loan facility used to rehabilitate Hwange 7 and 8 saw fruition, with an additional 600 MW added to the national grid at the end of FY23.

“This saw the monthly import bill decrease from US$26 million down to US$11 million by the end of the third quarter of 2023,” IH said.

According to the government, electricity imports are scheduled to ease 4,5 percent year over year to US$195,2 million.

IH said average electricity generation, however, stood at 1,026 MW against an average demand of 1,700 MW in 2023, with costs of load-shedding on the economy estimated at 6,1 percent of gross domestic product (GDP).

It said for 2024, growth for the sector is estimated at 17,4 percent, despite generation at Kariba expected to come off owing to low water levels.

“The supply gap is, however, expected to widen by 4 percent as demand from the productive sectors surges.

“In the medium term, the government is accelerating reforms in the sector by promoting private sector investment in renewable sources such as solar and hydro, the implementation of cost-reflective tariffs and governance reforms at ZESA and its subsidiaries,” reads the IH report.

Government also expects power generation from Independent Power Producers (IPPs) to grow 142 percent in the year to an average of 80MW.

According to the Zimbabwe Energy Regulatory Authority (ZERA), there has been increased investment in renewable energy by IPPs, mainly for their own consumption, in order to offset the adverse impact of load shedding.

By harnessing the power of the sun for solar energy, businesses are tapping into a sustainable and renewable energy source, reducing reliance on conventional power systems, especially hydro, which is also prone to the effects of the El Nino weather phenomenon.

ZERA chief executive, Mr Eddington Mazambani, recently said the majority of the investments are into solar energy, with some thermal, mainly in the mining sector.

“These projects are the most successful ones funded by private companies and in most cases, they are produced for their own consumption,” he said.

He said thermal power stations are at different stages of construction at Manhize Steel Plant (50 MW) and Sabi Lithium (15 MW).

According to the ZERA chief executive, the majority of investments are in mining, followed by commercial companies, while individual consumers are also heavily investing in solar. Agricultural companies have also significantly made investments in alternative energy sources, and irrigation facilities have been identified as key for agriculture firms.

Alternative renewable energy sources reduce over-reliance on hydropower, whose supplies are already unreliable for businesses, weighing on their productivity.

Companies like diversified crocodile breeders, Padenga, Ariston, and Tanganda have made efforts towards establishing alternative sources of energy like solar to power their operations.