Zim's energy sector reforms brighten

HARARE - A Commitment by Chinese President Xi Jinping to fund some energy deals, among other projects, has been received with optimism by analysts and ordinary Zimbabweans, who have borne the brunt of the country’s debilitating power woes.

The deals — headlined by a $1,4 billion agreement to upgrade the Hwange Power Station — are expected to contribute 2 400 megawatts (MW) into the national grid by 2018 and reports of the four major transactions also come amid indications that Energy minister Samuel Undenge had pitched “a host of other priority projects” to the Beijing leader, which also includes private sector players.

With an installed capacity of 2 200MW, Zimbabwe is only able to provide an average of 1 200 MW a day — leading to incessant blackouts of up to 18 hours a day and ruining its economic prospects.

However, analysts say the coming on board of Chinese investors to fund some of the country’s electricity projects was also a potential tonic for Harare’s power problems.

Other three private sector-driven power projects which are going to be funded by the Chinese are Makomo Resources (Makomo), China Africa Sunlight Energy (CASE) and Lusulu — each adding 600MW to the grid.

Buy Zimbabwe chief economist Kipson Gundani said if fully implemented, the projects had the capacity to boost the country’s ailing economy through an increase in production in the manufacturing and mining sectors.

“Energy is one of the critical factors affecting competitiveness in this country and once this is addressed there is nothing that can stop the economy from growing,” he said. 

Drought and increased power shortages have resulted in this hydroelectric-dependent country, slashing its economic growth to 1,5 percent this year from an initial target of 3,2 percent.

Power cuts typically add 40 percent to businesses’ costs in emerging economies, the World Bank estimates.

As costs of doing business increase, output decreases and firms become less profitable — reducing the government’s tax take — said one foreign business advisor in Harare.

“There is less money to invest in infrastructure, development and debt repayment — it is a vicious cycle.”

But that is all now likely to change after China’s Export-Import Bank (China Eximbank) agreed to fund the Hwange thermal plant, with Sino Hydro carrying out the work.

The project, which was initially slated for the second half of 2015, is now expected to start early next year and take approximately 42 months to complete.

China Eximbank is expected to put up almost $1,2 billion for the project, with the Zimbabwe Power Company contributing about $200 million.

Among other projects reportedly discussed between Undenge and Jinping’s team was Chint Electric Company Limited’s 100 MW solar farm in Gwanda. Together with its local partners, the Shanghai giant is hoping to construct a $202 million energy plant.

Finance minister Patrick Chinamasa said 80 percent of the Chinese loan would attract a concessionary interest rate of two percent, while the balance attracted commercial rates of around five percent.

Sino Hydro is also currently working on the $500 million Kariba South expansion project, which is expected to bring an extra 300MW to the national grid by 2018.

In July, Lusulu Power signed an agreement with China State Construction Engineering Corporation Limited to build a $1,1 billion coal power station starting in April 2016, with the 600MW plant being the first phase of a 2 000 MW project.

Makomo, Zimbabwe’s largest coal producer by output, has also laid out plans to build a $1,5 billion, 600MW thermal power plant in Hwange, to be financed by Chinese investors.

A 50-50 joint venture between Zimbabwe’s Old Stone Investments and Shandong Taishan Sunlight of China, CASE plans to spend $2,1 billion in the next five years on power generation, coal mining and methane bed gas extraction in Matabeleland North.

Economic analyst Francis Mukora said the above projects are likely to breathe new life into the economy that is slowly sliding into recession.

“Adequate electricity has the capacity to reduce the cost of production being exacerbated by the use of generators by companies to meet demand,” he said.

Mukora, however, advised government to make the deals clear and transparent.

“The full conditions of these deals, which are currently not available to the public, must be scrutinised so that we don’t burden future generations with heavy debts that will translate into heavy taxation on business and individuals — given our government’s penchant for taxing the nation,” he said.

Comments (1)

Zimbabwe used to sell electricity during the colonial day and industry was operating full capacity an population was of course less may be half of the current population. Now there is 10-15% operating capacity of the industry, population doubled yes, unemployment is at 80% and there is continued electricity shortage, the ZESA company has been split into several companies with CEOs, did this help to provide the power or making it more efficient. Smith Regime had sub power stations like Hwanga, Munyati, City Of Harare, City of Bulawayo, Hippo Valley and all these are now none functional. Is this due to sanctions or simple power public sector failure demonstration by Mugabe and ZANU PF. How many public sector function are in disarray now. 1. Air Zimbabwe 2. National Railways Zimbabwe 3. Grain Marketing Board 4. Cold Storage Commission 5. Cotton Company of Zimbabwe 6. CMED 7. NOCZIM 8. PTC 9. ARDA 10. ZISCO STEEL 11. Hwange Mine 12. Municipalities of every town can not supply water, refuse sewerage system, stands for home development etc, 13. ZECO Private Sector Company in disarray 1. Hippo Valley 2. Bindura Nickle 3. Border Timbers 4. Merline 5. Blue Ribbon 6. National Foods 7. Red Star 8. Triangle 9. Mkwasine 10. Mhangura Mine 11. Mashaba and Zvishavane Mine 12. Kamative 13. Newanetsi Range All these used to operate during the Smith Regime and after independence. employing at least a 2000 each and contributing to other industries stability such as grocery shops, banks and schools. All these went into smoke during the Land Reform period and before but all AFTER MUGABE TOOK OVER. So to MUGABE AND ZANU PF SEE WHAT DAMAGE YOU CAUSED. China was not even needed, even now we do not need it its on MUGABE and ZANU PF who need China so that they symphony their ill-gotten wealth and hide it in Switzerland before MDC takes over

amina - 5 December 2015

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