Zimbabwe: Holistic Approach On Ipp Needed

29 November 2019

There is need for a holistic approach in unpacking why Independent Power Producers (IPPS) have failed to start generating energy several years after most of them were licensed.

Mr Speaker Sir, Government licensed more than 30 IPPs to provide energy and compliment the Zimbabwe Electricity Transmission and Distribution Company in the wake of the crippling power shortages that the country is facing.

The failure by IPPs to take off several years after being licensed should be a cause for concern given the current power shortages.

The licensing of the IPPs, Mr Speaker Sir, created a lot of hope and excitement given that they had an installed capacity of 6 700 Mega Watts against the country's requirement of less than 2 000 MW.

Clearly, Mr Speaker Sir, had the companies started generating, the country would be boasting of excess energy. This can be used for exports thereby producing the much needed foreign currency.

Their failure to take off on their projects is a cause for concern and will not do the country any good given the excitement that had been created. Equally important, Mr Speaker Sir, it is imperative for Government to reflect on the reasons that have impeded them from commencing their projects.

At least eight IPPs appeared before the Parliament Portfolio committee on Energy and Power Development last week. Legislators were anxious to have an appreciation of what has held these companies back from getting down to business. What came out from the deliberations were an eye opener as it left unanswered questions both from the IPPs and from Central Government.

The Zimbabwe Energy Regulatory Authority that was represented by its acting Chief Executive officer, Mr Eddington Mazambani was quite worried on why they had not taken off. More importantly legislators expressed anxiety and impatience on the failure by IPPs from taking off.

It also emerged during deliberations that one of IPPs, Rio Zim had been sitting on two projects which had coal deposits that have been extracted since 1972.Uzumba MP Cde Simba Mudarikwa (Zanu-PF) castigated that the listed company was sitting on two projects which has two coal deposits that should have been extracted since 1972.

Cde Mudarikwa said it was not surprising the company would say that coal was no longer a competitive mineral worth investing in given growing international condemnation about the inherent air pollution associated with the mineral.

Bikita South MP Cde Joseph Musakwa (Zanu-PF) said it was not fair for Rio Zim to sit on a project that had coal, a national asset with no benefit accruing to the country.

However, it is important, Mr Speaker Sir, to indicate that IPP representatives raised pertinent issues which require due consideration by policy makers such as the Government.

One major issue they raised was the need for policy consistency on the part of the Government, particularly before the Second Republic led by President Mnangagwa.

The representatives argued that one reason why they failed to take off was their failure to court investors who raised the issue of shifts in policy direction which they said had an adverse effect on project viability.

They also cited issues like the introduction of bond notes which they said raised uncertainty on the part of investors who were worried on whether they would be able to repatriate their profits in hard currency.

More telling was another policy shift where the Government outlawed the multicurrency basket. Mr Speaker Sir, these are issues that ought to be interrogated and address holistically the perennial problem of energy.

Finance Minister pledged to support IPPs in his 2020 national budget, something that is positive. But judging from what the IPPs said Mr Speaker Sir, it is more than just financing that IPPs require. Such funding will not make much impact if it is not accompanied by policy consistency.

Mr Speaker Sir, one thing that becomes clear from the foregoing is that there seems to be no adequate consultations with relevant stakeholders before announcement of a new policy. There is need Mr Speaker Sir, for the affected sector to be consulted so that when it is implemented there would be a buy in.

Rio Zim deputy chairperson, Mr Caleb Dengu said their firm assumed total control of the resource in 2016 after Rio Tinto International withdrew from Zimbabwe.

He said bond notes were introduced at a time they had secured an investor. As a result, they had to renegotiate terms since he wanted to know which currency would be used to pay for their investments.

Another firm, Southern Energy Power Project representative, Mr Nikita Madya said they had secured funding support from China in 2016 and were set to go.

"However this financing was withdrawn after the Government of Zimbabwe defaulted on existing debt obligations to Chinese lenders. As a result, Sinosure, the Chinese export credit insurer is still not offering country risk guarantees for projects in Zimbabwe until the arrears are cleared. This means Chinese commercial banks are unable to provide any loans," said Mr Madya. Another representative from

Southern Energy Power Project, Mr Raymond Mutokonyi said coal producing business was being affected by Zimbabwe Power Company that was struggling to pay for deliveries thereby impeding on firms to procure spares, fuel among other essentials.

It is however refreshing to note, Mr Speaker Sir that Finance and Economic Development Minister Professor Mthuli Ncube indicated that Government will support the use of alternative sources of energy through provision of several fiscal incentives.

Presenting his 2020 national budget last week, Prof Ncube said Treasury would support use of alternative sources of energy so that they would import equipment and requisite accessories.

He said there was need for improved electricity supply through imports and other alternative sources of energy and harnessing of power generation capacity from IPPs.

Mr Speaker Sir, the earlier all stakeholders put their hands on the wheel the better in order to salvage industry which has suffered immensely owing to power shortages.

See What Everyone is Watching

More From: The Herald

Don't Miss

AllAfrica publishes around 700 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.