Zimbabwe: Power Cuts Cost Zim U.S.$200m

Captains of industry have warned that more companies will shut down within a month if government fails to come up with an urgent solution to the rolling massive power outages.

This comes amid revelations that the economy is losing between US$150 million and US$200 million weekly due to the prolonged electricity crisis.

The country is experiencing daily load-shedding schedules which last up to 18 hours. The power cuts have left industry reeling from high costs of running diesel-powered generators as fuel prices continue to rise.

The Zimbabwe Energy Regulatory Authority (Zera) this week raised fuel prices by 23% for diesel from ZW$5,84 to ZW$7,19 and 22,4% for petrol from ZW$6,10 to ZW$7,47.

This comes as a number of companies have already shut down, while others have drastically scaled down operations.

Confederation of Zimbabwe Industries (CZI) president Henry Ruzvidzo told the Zimbabwe Independent this week on the sidelines of the body's ongoing annual congress and international investment forum in Victoria Falls that several companies had closed, adding that at industrial level, they had started to quantify the losses. He said the damaging power cuts will result in the country's capacity utilisation falling way below the CZI's projected 45% level.

"This whole situation is a disaster. Our members are suffering and a number have already closed and some scaled down. We are relooking into it to quantify the potential as well as the exact number of those that have closed. The capacity utilisation will fall sharply and it is not healthy for the nation. It looks like we have no immediate solution. For anyone who is serious about production, it is not sustainable to run a generator every day," he said.

Zimbabwe National Chamber of Commerce chief executive Christopher Mugaga said the power outages have resulted in weekly losses of between US$150 million and US$200 million in lost revenue, production and exports.

"We have done a snap survey and found that the manufacturing and agriculture sectors have been the most affected by the power cuts. The economy is losing between US$150 million to US$200 million weekly measuring lost production, exports and From revenue," Mugaga said.

He said the impact of the power cuts will be felt in the medium to long-term, particularly on the balance sheets of companies, due to legacy issues and deficit of exports.

Norton-based tile manufacturing firm Sunny Yi Feng said that it lost US$1,3 million last week after 250 000 square metres of tiles were damaged while in the production process due to a sudden power outage.

The Chinese-owned company has also lost several pieces of equipment, especially electric motors, which have been damaged by the rolling power cuts.

Further, Sunny Yi Feng's production costs have been pushed up as it requires over ZW$100 000 to buy 18 000 litres of diesel per day as a result of the prolonged load-shedding.

Mobile network operators are among the worst affected economic players, with companies facing financial ruin if they continue buying huge volumes of diesel for generators which power thousands of base stations.

Sources in the telecoms sector said the nation faces catastrophic failure of the communications networks if the electricity crisis is not urgently addressed.

"The use of diesel-powered generators is unsustainable. It's every expensive. No business can survive such huge expenses," said a telecoms executive.

This week, Econet, the biggest mobile network operator, issued a statement saying it faced a challenge after its generators at the Network Operations Centre failed to restart following a power outage. EcoCash, the country's biggest mobile money platform, crashed, leaving customers stranded.

Industrialists said the failure to find an immediate solution to the crisis is threatening the very existence of economic activity.

Schweppes chief executive Charles Msipa said four of the company's five manufacturing plants have no electricity for 18 hours a day, resulting in disruption to production schedules, market supplies and processing of perishable fruits.

"We have night production wherever practical. Two plants are run on expensive diesel generators, costs of which make our products unaffordable. We will have to close down if the situation continues like this in the next month," Msipa warned.

"However, we are planning to partner Distributed Power Africa to install rooftop solar at our manufacturing plant during the August-December 2019 period to try and avert closure. You will understand that different production lines have different capabilities and are affected differently by people costs. We are still to ascertain the actual losses, but it's a lot," he said.

Proplastics chief executive Kuda Chigiya said his plant was operating at one third of the company's capacity utilisation. This translates to ZW$3,3 million in monthly potential revenue losses.

"The generator is costing me ZW$1,87 cents per kWh compared to ZW0,11 cents kWh which is charged by Zesa. The variance is 1 604% if running on the generator," he said.

"So in terms of these costs, we cannot run for the entire month because ideally we are supposed to run 24/7, but to cover our costs we are now running 10 days a month. Ideally, in current RTGS terms our revenue is supposed to be between ZW$5 million and ZW$10 million per month. It is a suicidal arrangement that we cannot sustain for more than three months as we will not be able to restock. It is a temporary measure in the hope that the authorities will come up with something."

Chigiya said a tariff hike is now inevitable and was critical for legacy debts and to enable the companies to continue operating.

He said gadgets were damaged, forcing the company to employ mitigatory measures, while the retrenchment of workers was also now inevitable.

Crystal Candy CE Jimmy Psilos said his company had lost in excess of ZW$1 million since the load-shedding started. The company is incurring ZW$200 000 in operational costs.

"We are bringing in a big generator to enable us to operate. It is expensive, but it will not be as expensive as not having to produce due to load-shedding," he said.

In addition to this, the Independent is reliably informed that one of the country's largest tobacco processors, MTC, yesterday sent dozens of its workers home after instructing them to only show up when there is electricity. A source revealed that the company can no longer afford the costs of running on a generator.

A manager at a major retail outlet in one of Harare's suburbs revealed that they fork out more than ZW$183 000 monthly for diesel to run an 850-litre generator on a daily basis as a result of the 18-hour load-shedding schedule.

Economist Godfrey Kanyenze said all this was an indication of a government that never learns from its mistakes, keen on tolerating corruption, promotes rent-seeking behaviour and arbitrage opportunities.

"In a normal economy, Zesa management would have been fired for failing to deliver service. Zimbabwe continues to tolerate this kind of behaviour. We had ZimAsset and it failed," he said.

"It was never implemented, but we already have the Transitional Stabilisation Programme, which government is failing to implement. All this stiff-neckedness has resulted in a situation like the one we find ourselves in concerning load-shedding."

Reserve Bank of Zimbabwe governor John Mangudya told a local weekly that diesel consumption has gone up by 20% to 3,6 million litres daily due to the rolling power cuts.

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