ZIMBABWE’S state-owned power utility Zesa Holdings (Zesa)
is on the brink of collapse due to a plethora of problems.
It is beset by multiple crippling factors, including rampant
power theft, non-payment of electricity bills, vandalisation of infrastructure,
as well as insufficient foreign currency, an explosive internal report reveals.
Energy and Power Development minister Fortune Chasi, who
confirmed the confidential report to the Zimbabwe Independent this week, said
there are even cases where some power sub-stations are running without being connected to the
national grid, leading to loss of electricity. This comes as Zesa is pleading
with government for a subsidy to cover funding
gaps created by its refusal to approve the company’s
periodic requests for upward electricity tariff reviews, without which its
operations are severely compromised.
Zesa says that the funding gap could balloon to ZW$2,8
million by the end of the year if the government does not approve its requests
for higher tariffs. It also says it is
failing to repair its critical machinery due to acute
foreign currency shortages, as it cannot procure required spare parts sourced
outside the country.
Chasi said he will present the report to the next sitting
of cabinet, where he will also call for adoption of solutions which can rescue
the perennial loss-making parastatal from
the brink, including a vigorous debt collection strategy,
revival of vandalised power infrastructure and introduction of severe and
deterrent measures against vandals and thieves who have decimated Zesa
infrastructure in recent years. He said the document sheds light on the true
state of affairs at Zesa and what needs to be done to save the company and
possibly redefine the country’s power systems.
Chasi said he commissioned the compilation of the report
after he learnt of the existence of large-scale abstractions of electricty,
where some sub-stations are not linked to the national grid.
“We have cases where some of the Zesa sub-stations are not
linked to the national grid and yet the power goes to clients. This can only
imply that there is a lot of power being lost. We are currently undertaking
thorough investigations on this matter to try and establish the extent of the
problem but it appears to be rampant,” Chasi said in an interview this week.
“So this report will guide us in terms of trying to save
Zesa and map the way forward in terms of curbing these massive power thefts. We
have also established rampant cases of illegal connections. The result of this
has been that commercial loss of power in Zimbabwe has gone beyond the
internationally agreed limit because the losses are quite significant.
“We have also faced serious problems regarding the
vandalisation of power infrastructure and theft of electricity transformers and
cables. So when I take the report to Cabinet next week, I am going to propose
that as a country, we should tighten the law to, for instance, introduce a
mandatory 30-year sentence for those convicted by the courts for committing
these sorts of offences. We have been studying what is done in other countries.
For instance, in South Africa they have a mandatory 30-year sentence which I
think is
more deterrent than the 10-year sentence we have here.”
The report recommends that Zesa should have demand-side
management strategies for it to survive.
“A number of demand-supply management opportunities are
available but their implementation is being guided by their level of
complexity, cost, planning, data availability,
technological advancement and implementation complexities.
General available opportunities include loss of efficiency arising from poor
maintenance practices of electric motors, reduction of power abstractions and power theft as well as
availability of new generation efficient motors and adjustable speed drives.
The absence of reliable power supplies
cripples economic growth and retards socio-economic
development,” the report reads.
The report further indicates fears that Zesa may collapse
if the debt situation is not immediately resolved.
“Zesa has been in a drive to collect its dues from the
clients. This is an effort to turn around the fortunes of the company. The debt
overhang has resulted in poor cashflows
which have negatively impacted performance of the company
and is threatening its survival. Various initiatives have been put in place in
an effort to collect from the clients,”
the report reads.
Zesa, in the report, is also appealing for a subsidy from
government to the tune of ZW$1,4 billion which it claims to have lost between
January and July this year when President
Emmerson Mnangagwa’s administration refused to approve its
tariff hike proposal. Government only approved a power tariff increase last
month when Finance minister Mthuli Ncube presented the Mid-Term Fiscal Policy in parliament.
However, Zesa is still requesting for more tariff hikes and
fears that the funding gap could balloon to ZW$2,8 billion if government does
not approve such proposals.
“The recent 2019 tariff adjustment resulted in a tariff of
ZWLc38,61/kWh from ZWc9,86/kWh (292% adjustment). The delay in the award has
resulted in a funding gap of ZW$1,4
billion for the period January to July 2019. A tariff of
ZWLc79,20/kWh has been applied to July target revenue as per application. The
failure to implement the proposed tariff of
ZWLc79,20/kWh from August to December 2019 will result in a
funding gap of ZW$1,44 billion. Hence the total funding gap for the year is
ZW$2,8 billion, which could cripple
operations at the company,” the document further reads.
Zesa has also been battered by insufficient foreign
currency revenue inflows from its encumbered and non-encumbered exporting customers,
who are required to pay electricity bills
in forex.
“On average about US$8,5 million (including levies and VAT)
per month is expected from customers encumbered on the Afrexim Bank loan
facility that provides funding for Hwange 7
and 8 Expansion Project. Then about US$12,7 million
(including levies and VAT) is expected per month from the exporting
non-encumbered customers. The assumption is that levies and VAT will be paid in local currency to enable enough
funding to meet current import bills,” the report says.
“The United States dollar payments from these customers
will be used to clear the current bills for power imports. However, the
expected USD inflows are not sufficient to meet
the average import bills of US$15 million. Hence, the RBZ
(Reserve Bank of Zimbabwe) will have to assist in clearing the current bills in
addition to clearing the outstanding
arrears with a payment plan of US$890 000 per week.
“Though funding for power imports may be met by revenue
inflows from potential exporters, funding for critical spares, repair and
replacement of vandalised and faulty
transformers, just to name a few, remains outstanding.”
Zesa is owed a total of ZW$1,2 billion by consumers who are
mainly government departments, parastatals, local authorities and commercial
farmers.
The country is currently in the middle of an unprecedented
power crisis which has forced Zesa to come up with a severe load-shedding
programme which has seen most areas go for up to 18 hours without electricity.
Zimbabwe requires 1 800 megawatts per day, but currently
there has been a scaling down at the Kariba Power Plant due to low water levels
in the lake, which have limited power
production to just 190MW, down from 1 050MW per day. The
ageing and frequently breaking down Hwange thermal power station is producing
522MW per day, while the country imports 50MW per day from Mozambique and 400MW per day from South
Africa’s Eskom.
Small thermal power plants contribute just about 35MW per
day, leaving a power deficit of 700MW per day, which is being managed through
rolling load-shedding. Zimbabwe Independent
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