Power supply remains major threat to business viability
POWER supply in developing countries, Zimbabwe included, has become a severe headache for businesses and the wider economy, in addition to other existing challenges.
It is widely recognised that the availability of modern, reliable and efficient energy services is an important driver of economic development.
Most countries in Sub-Saharan Africa, however, face major challenges in trying to achieve their development and social obligations because of inadequate access to electricity and the power situation has weighed on company performances. While renewable energy and energy-efficient technologies have not attracted the level of investment, of late several companies are opting to invest in small ways to augment their energy demand, which national power supplier ZESA is struggling to provide.
Proplastics, a company involved in the manufacturing of plastic pipes, said in its recent financials that power supply remains a risk for the business and hence it will invest in a solar-generating project.
“The solar generating project, which was reported on at half-year, will commence before the end of the first quarter as the procurement process for the requisite materials is already underway. This project will not only reduce the group’s carbon footprint but will, in addition, have a significant positive effect on production costs as it will be fully integrated into the existing ZESA and generator supply models.
“We expect the project to be up and running by the end of the first half of the year,” the company said.
The company highlighted that electricity supply remained a significant challenge in 2023, and the business continued to encounter outages related to load shedding, which resulted in the use of expensive backup generators to ensure continuity of production.
It said a total of forty-seven days of backup generator usage were recorded during the year, resulting in a significantly higher cost of production. The electricity supply crisis in Zimbabwe is set to worsen following revelations by the Zambezi River Authority (ZRA) of low water levels in Kariba used for power generation. The low water inflow is attributed to the El Niño-induced drought spell, which is a direct consequence of the climate crisis.
Secretary for the Energy and Power Development Ministry, Gloria Magombo, recently said climate change has had adverse effects on the country’s electricity generation capacity.
ZRA in March this year reduced electricity generation for Kariba Power Station to 214 megawatts (MW) against its installed capacity of 1,050 MW due to low water levels.
As of April 24, 2024, the country was generating a total of 1 117 MW from Hwange (779 MW), Kariba (300 MW), and 43 MW from IPPs.
Dairibord Holdings said in its 2023 financials that frequent power outages and inconsistent municipal water supply increased the cost of business operations.
Turnall, on its part, said the economy continues to encounter erratic power supply, which adversely affects productivity and the cost of production. Confederation of Zimbabwe Industries (CZI) president, Kurai Matsheza, recently told Business Weekly that electricity costs have constantly been increasing while at the same time supply remains depressed.
“Some companies will switch to more expensive alternative sources of power, so again, it is an increase in cost. When that happens, combined with the real cost of electricity that has aggressively gone up, it just makes the cost of producing more expensive, and those costs will be transferred to the goods and services that are being sold,” he said.
He added; “It is not good for us as producers but also not good for consumers; this will just make the cost go up.”
While the companies are investing in alternative energy, Matsheza said most of them are short-term, as huge power projects require significant capital outlays. According to the energy regulator, 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 erratic power supplies.
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.
According to ZERA, the majority of energy investments are now into solar energy, with some thermal, mainly in the mining sector.
ZERA noted that most successful projects are the ones funded by private companies, and in most cases, they are produced for their own consumption. Agro-focused retailer, CFI Holdings, said the group uses different energy sources, with ZESA being the main power source for most operations, with lower usage for shops with solar backup options.
It said diesel-powered generators are mostly used as an alternative to ZESA in cases of load-shedding. Victor Bhoroma, an economist, said power is the gateway to productivity and industrialisation in an economy; hence, without addressing power generation, the Zimbabwean economy will not achieve consistent growth.
He said the loss in generation output means prolonged power cuts of 6 to 12 hours per day, and this is unsustainable for the local economy, which is heavily skewed towards the agro-industry and mining, which require an uninterrupted power supply.