GOVERNMENT has extended the suspension of duty on power equipment imported by ZESA Holdings, as Harare responds to clear signs that the country is headed for an excruciating economic crisis that could prompt the collapse of Zimbabwe’s few remaining industries.
At the heart of the escalating economic crisis projected by analysts to be as severe as the 2007/2008 turbulence is the deteriorating power output, which has grounded mines, manufacturing firms, farms and hospitals, sparking national outrage.
ZESA, which is owed over US$1 billion by its 621 000 customers, has an installed capacity of 1 600 megawatts (MW) but it has been producing about 1 000 MW.
The power producer’s problems have been worsened by declining water levels at the Kariba hydro electricity power plant that has forced it to reduce generation by almost 50 percent.
In a Statutory Instrument (SI) issued last week, government said it would be extending the suspension of duty, in force since 2003, until June this year.
“It is hereby notified that the Minister of Finance and Economic Development has, in terms of section 235 of the Customs and Excise Act, made the following regulations…suspension of duty on power equipment, critical spares and transformer components imported by ZESA Enterprises (ZENT), Zimbabwe Electricity Transmission and Distribution Company (ZETDC) and successor company of Zimbabwe Electricity Transmission and Distribution Company (ZETDC) and the Zimbabwe Power Company (ZPC),” the SI said.
“Subject…to such conditions as the commissioner-general (of the Zimbabwe Revenue Authority (ZIMRA) may fix, a suspension of duty shall (for a period of one year with effect from 15th June 2015 to 4th June, 2016) be granted,” it added.
The decision to forego duty is unprecedented, given government’s current cashflow problems that have seen civil servants entering 2016 without bonuses promised in 2015.
But it also signifies the tremendous pressures that have been piling on authorities to act on the power crisis.
The suspension of duty will be key in helping the power company undertake several expansion and rehabilitation projects already underway, as government fights to stabilise the power supply situation.
After failing to invest in new capacity for close to one decade and moving at a snail’s pace in licensing independent power producers, the cash-strapped government appeared to have finally accepted reality and placed power generation among its top priorities in the last two years.
But the gestation period for power projects means that current projects will only start feeding into the national grid after three or four years.
The US$553 million Kariba Hydro expansion project, funded by the Chinese government, is underway, to add 300MW to the national grid.
It will be brought on line in 2018, but probably well after thousands of industrial firms would have collapsed.
ZESA is also undertaking major facelifts at the Hwange Thermal Power Station at an estimated cost of US$1,3 billion, which will see output rise by 600MW.
The crippling power cuts are already undermining the competitiveness of local products, and also worsening the low productivity levels in the manufacturing sector and exposing government’s ambitious economic blueprint, the Zimbabwe Agenda for Sustainable Socio Economic Transformation (Zim-Asset), to potential failure.
Under Zim-Asset, government projected that the energy sector would grow by 4,2 percent, 4,5 percent, seven percent, 9,8 percent, 11 percent and 16 percent in 2013, 2014, 2015, 2016, 2017 and 2018 respectively.
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