THERE is a positive correlation between power supply and economic development.
Economic development hinges on availability of energy resources. If Zimbabwe invests in power, this will in turn attract foreign direct investment (FDI), create jobs, increase opportunities and enhance living standards of our people.
No major development can take place without stable, reliable, cheaper and sustainable energy resources.
Every Zimbabwean citizen, whether an ordinary farmer or a business executive will tell you that the country is facing huge power challenges owing to frequent load shedding, vandalism of electricity cables and transformers and non-availability of power in certain areas.
In my own neighbourhood in Ruwa, we have gone for close to three weeks without electricity.
Zimbabweans behold, Kariba Dam whose water levels could soon fall below the required 475,5 metres level for power generation, could stop generating power soon unless if water levels rise.
Hilton Munendoro, in his article: Zimbabwe energy sector facing a boom clearly articulated the power challenges as follows:
i. Billing and collection of revenue from consumers;
ii. Aged and obsolete equipment;
iii. Poor state of infrastructure;
iv. Operational challenges, including under capitalisation, compounded by debt-ridden financial positions;
v. Inadequate specialised skills and tools required for planning and forecasting energy needs;
vi. High cost of rural electrification through grid extension and scattered nature of settlements; and
vii. Theft, vandalism of infrastructure by criminals, which reduces output and disrupts production.
Government interference in the running of ZESA Holdings remains an impediment to efficient operations of the power utility.
ZESA cannot increase its tariffs, or implement certain projects, for example, without government approval.
There are instances where ZESA has proposed to increase its tariffs and these proposed tariffs were either cancelled or revised downwards by government bureaucrats.
At the beginning of this year, ZESA proposed to increase power tariffs from the current US$0,986/ kilowatt-hour (kWh) to US$0,1464/kWh, but no government approval has been given yet.
ZESA imports power from the Southern African Development Community region at an average cost of US$0,1550/kWh, but sells it to consumers at a subsidised rate of US$0,986/kWh. Is this sustainable? Definitely a big NO!
In 2013, feeling the heat from government, after all local authorities had been directed by government to write-off debts for ratepayers, ZESA buckled and announced that it would write-off debts to farmers and pass a credit of US$160 to all domestic users. The cost to ZESA was a staggering US$170 million.
Dema Diesel Power Plant
Currently, there are issues with the 200 megawatt (MW) Dema Commercial Diesel Power plant project, which was awarded to Sakunda Energy and Glasgow-based company, Aggreko.
A local daily reported recently that the project has been delayed. Apparently, ZESA has refused to sign an off take agreement with Sakunda and Aggreko in the absence of a new electricity tariff increase.
What baffles us is: Was ZESA not part of the project from inception to an extent that at this late stage they are now refusing to sign the agreement with the suppliers? Surely, if ZESA were involved in the project and selection of the suppliers, and were “part of the project” why would they be refusing to sign the agreement with the suppliers?
We smell a rat here.
ZESA could have been “coerced” by government into the project and “muzzled” to prevent the parastatal’s executives from speaking against it.
This could be another example of government interference in ZESA’s operations.
The Dema project is unsustainable from a cost perspective. The diesel power plant, according to the local daily, will produce expensive power at about US$0,18/kWh yet ZESA is importing cheaper power from Mozambique at US$0,1550/kWh and from South Africa at US$0,13/kWh.
We do therefore understand why ZESA is refusing to sign the three-year off take agreement with Sakunda and Aggreko. Why would we construct a diesel power plant which is unsustainable to run and produces power at a higher cost than imported power? Why not just import the cheaper power from Mozambique and South Africa? Maybe we are missing the point here.
On another note, is the investment in diesel plants a good idea when the world is moving towards investing in sustainable clean energy?
ZESA’s initiatives to address power challenges
According to media sources, ZESA has embarked on a number of initiatives to address power challenges in Zimbabwe. These include:
•Introduction of pre-paid meters to address revenue collection challenges. A total of 38 000 meters have been installed countrywide;
•Adoption of the demand side management programme: ZESA is promoting the use of energy saving bulbs and will distribute about 5,5 million energy savers. This initiative is expected to save power usage of up to 300MW;
•ZESA is also promoting the use of solar geysers as opposed to electrical element heated geysers, which consume more energy;
•Improving security on installed equipment, such as transmission cables and transformers through police and neighbourhood watch committees;
•Lobbying for prosecution and tougher sentences on theft and vandalism cases involving its assets;
•Rehabilitation of existing power plants i.e. Hwange, Munyati and others; and
•Development of new power projects such as Kariba South, which will generate 300MW on completion.
Whatever power projects are implemented, they should also take into account the global drive for investments into sustainable renewable energy resources and clean energy with zero carbon emissions. And where fossil fuels are to be used, appropriate technology, which limits carbon emissions, should be applied.
Reforms in power regime
Comprehensive reforms in the power sector are required to ensure that Zimbabwe provides sustainable, reliable, adequate, affordable and efficient power.
Some partial reforms aimed at improving efficiencies have taken place i.e. the unbundling of ZESA into separate/stand alone companies such as the Zimbabwe Power Company, the Zimbabwe Rural Electrification Agency (ZERA), the Zimbabwe Electricity and Transmission Distribution Company etc.
The fact of the matter is, however, that these companies are still State enterprises and are part of ZESA and therefore still fall under Ministry of Energy and Power Development.
The Ministry of Energy and Power Development has also issued licences to private operators in an effort to bring in other players into the power field.
However, there has been very little impact as no major power projects have been implemented to date.
Given the fact that power projects require huge capital outlays, private players can only invest in power if the sector is de-regulated and certain policies are in place to enable them to profitably generate, distribute and sell their power.
Government through ZESA still remains the dominant player in power generation, distribution, tariff determination and billing.
ZESA still controls the entire cycle in the power business and has an undisputed monopoly.
What we need to see is the opening up of the power sector to ensure that there are other players who can also compete with ZESA so that the consumers benefit.
Currently, consumers have no option and are at the mercy of ZESA.
The following are some of the reforms required:
• Deregulate the power sector and allow private players (independent power producers – IPPs) to generate, distribute, determine own tariffs and bill consumers;
• Divesture of ZESA into independent commercial units i.e. creating stand-alone units, which will operate as commercial enterprises (outside control of ZESA). Some ZESA assets will be disposed of to private players;
• Promote Public Private Sector Partnerships;
•Promote Build Operate Transfer projects;
• Reform the regulatory environment i.e. ZERA should be independent and in turn create a non-partisan, transparent and fair regulatory environment;
• Reform the public tender system to ensure that the process is non-partisan, transparent, and fair, considering that power projects involve huge capital investments. This would weed out corruption in awarding tenders;
• Ensure that there is a regulatory framework that is clear, consistent and that brings transparency in the administration of the power sector.
We have seen economic advantages that followed when Zimbabwe opened up the telecommunications sector, which for many years had been monopolised by the Post and Telecommunication Corporation.
The opening up of the telecoms sector resulted in new players such as Econet Wireless, Telecel and Africom coming in.
We have seen huge investments in this field, resulting in the creation of thousands of jobs, improvement in networks and products thereof, lower tariffs to the consumers etc.
If the telecoms industry was opened up, why not do the same to the power sector?
Statistics show that at least 17 African countries have deregulated their energy sectors. Nigeria is one example.
During the tenure of presidents Ulusegun Obasanjo and Goodluck Jonathan, the Nigerian government embarked on aggressive power generation projects, through the creation of private sector-funded projects, IPPs and state funded National Integrated Power Projects (NIPPs).
The target of the Nigerian government was to add 4 700MW to the existing power generating capacity through the IPPs and NIPPs.
The Nigerian government, under Jonathan, managed to overcome funding and other governance challenges that almost derailed the NIPPs. Power generation grew from 2 800MW to 3 800MW under his administration.
Currently, at least 50 percent of the power produced in Nigeria is produced by private players.
Unless if there is strong political will, followed by significant national investments in new power projects, Zimbabwe will not be able to address the current power shortages, which threaten to derail economic development in the country.
Government should liberalise the power sector. The process should not be rushed to avoid pitfalls associated with hastily convened policies.
A clear road map (i.e. a power privatisation policy) which sets out government objectives should be crafted to ensure that all is in place before the energy sector is opened up. A regulatory framework, i.e. legislation passed by Parliament, that gives legal effect and sets out modalities for de-regulation of the energy sector should then follow.
Advantages of privatisation of the energy sector include:
• New investments in the power sector;
• Economic growth hence job creation;
• Increase in power generation;
• More competition hence efficiencies in power generation, distribution and billing;
• More choices to consumers as ZESA monopoly will be abolished;
• Value for money for consumers in lower tariffs.
Under a deregulated environment, government would continue to play a role in the power sector through ZESA, which would retain certain functions and strategic assets, with the other non-core assets being sold to the private sector investors.
Allen Choruma can be contacted on e- mail email@example.com
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