NewZimbabwe.com has invited Mr. Vengai Madzima, the Senior Partner at Madzima Chidyausiku Museta Legal Practitioners (MCM Legal), to discuss legal issues affecting Zimbabweans living in the diaspora. The discussions are general and those seeking specific legal advice should contact their lawyer.
Reporter: Welcome back Mr. Madzima, this week we want to discuss the potential for investment in the energy sector in Zimbabwe. Is there scope for investment in this sector by the diaspora market?
VM: The energy development and power generation sector in Zimbabwe is an investor's dream with strong potential for short-term and long-term returns for investors. To put this into context, the local energy demand outstrips supply by over 100%. The combined national annual energy supply averages around 1500 MW with an installed capacity of around 2000MW against a national requirement of around 4000 MW.
As the economy grows so will the energy requirements.
To give an example, the mining sector alone is projected to be requiring over 2000MW per annum by 2025. That is already more than the national combined average and almost equal to the current installed capacity. If we then look at the other investments we discussed in the past weeks such as agriculture, property development and manufacturing, the growth of these sectors is all hinged on a steady and reliable energy supply.
Urbanisation, rural electrification and mechanised farming have increased the demand for electricity on the national grid creating massive opportunities for private sector investments.
Reporter: What are the opportunities available in Zimbabwe to allow for energy generation?
VM: There are various underutilized energy resources. If we were to start with fossil fuels, the country has proven coal resources in excess of 12 billion metric tonnes of good quality coal with calorific values ranging from 20 to 32 megajoules per kilogram. There is also a large and unexploited coal bed methane resource, the 11th largest in the world I might add, a potential clean energy source.
If we are to then look at renewable energy resources, which are more permissive to various investment thresholds, we have the best climate for growth or renewable energy production. If we take solar energy for instance, we have high solar irradiation with over 3000 hours of sunshine per year, creating opportunities for investments in solar photovoltaic technology for high-voltage solar generation plants or even smaller plants for industrial or domestic use.
The availability of several perennial rivers offers opportunities for small and large hydroelectricity projects.
There are also opportunities in the largely untapped biomass and waste from agriculture and municipal areas for energy production with all proposed potential investment areas having net metering opportunities into the national grid through Private Public Partnership.
Other energy sources may also be considered, for instance, investment in woodlots for the growing wood requirements on curing tobacco by the growing tobacco sector. There are currently over 100 000 listed tobacco growers with energy requirements for their crops and the majority of them still use wood as the primary energy source for curing.
Reporter: What licences and or permits are required for energy projects?
VM: It will depend on whether they are large or small energy projects, smaller projects requirements may require reduced procedures and fees. All however have to comply with the regulatory framework prescribed by law. Licences and permits may include generation licences, Transmission licences, Environmental Impact Assessment Certificates for projects, Distribution licences, retail Licences and construction permits.
Reporter: What common steps may be required to obtain the licences for the diaspora and foreign investors?
VM: To construct an energy-generating plant, there will be a need to submit a detailed project proposal which addresses the technical aspects of the project, and its financing structures including potential environmental impact and mitigation. The project will naturally have to be compliant with the laws of the country which include the safety and technical standards prescribed by ZERA. A foreign investor will have the added obligation of first obtaining an investment license.
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Reporter: How favourable is the current policy in Zimbabwe to private sector investment in energy generation?
VM: The existing energy policy framework supports private sector investment by allowing private companies to generate and sell electricity to the national grid. This can be achieved via build own operate, build own operate transfer arrangements or Public Private Partnerships. There are various tax breaks and incentives available in the industry which include tax holidays, duty exemptions on some energy equipment and potential special economic zones status.
Reporter: Thank you, Mr. Madzima we have run out of time. We look forward to next week's discussion.
VM: Thank you.
Vengai Madzima is a Senior Partner at Madzima Chidyausiku Museta Legal Practitioners (MCM Legal) in Zimbabwe and can be contacted at vengai@mcmlegal.co.zw
NewZimbabwe.com will have another discussion on legal issues affecting our readers in the diaspora next week, share your comments and experiences with us.
