Diesel consumption declines as industrial output faces headwinds
Zimbabwe’s diesel consumption saw a notable decline in the first quarter of 2024, reflecting broader challenges facing the nation’s industrial sector.
Data released by the Zimbabwe Energy Regulatory Authority shows that diesel consumption fell to 251 million litres in the first quarter of 2024, down from 258 million litres during the same period in 2023.
This 7,6 million litre reduction underscores the intricate interplay of improved power supply, ongoing issues with commodity prices, and economic hardships affecting industrial activity.
One of the key factors influencing diesel consumption is the state of the country’s power supply.
Zimbabwe has made strides in stabilising its electricity grid, resulting in reduced reliance on diesel generators for backup power.
The Zimbabwe Electricity Supply Authority (ZESA) has been working to enhance the reliability of the power grid, which has somewhat alleviated the pressure on industries to depend on diesel.
However, despite these improvements, load shedding remains an intermittent challenge for some sectors. Industries, particularly those with high energy demands, continue to experience sporadic power cuts, necessitating the use of diesel generators to maintain production.
This dual reality of improved yet unreliable power supply reflects a transitional phase for Zimbabwe’s energy sector, impacting diesel consumption patterns.
ZESA’s recent initiatives signal a commitment to bolstering industrial productivity. The authority has recognised the crucial role of consistent power in supporting economic growth and has introduced measures aimed at ensuring a more reliable electricity supply to key industrial hubs. ZESA’s efforts include infrastructure upgrades and strategic partnerships to increase power generation and distribution efficiency.
Kurai Matsheza, president of the Confederation of Zimbabwe Industries (CZI), commended these efforts, highlighting their importance for industrial stability.
“ZESA’s realisation of the need to support industry is a positive step forward,” said Matsheza. “A stable and reliable power supply is critical for the operational efficiency of our manufacturing sector.”
Despite these advancements, the persistent occurrence of load shedding in certain areas means that industries remain cautious, often keeping diesel generators on standby.
This cautious approach, while necessary, has contributed to a reduction in overall diesel usage as the dependency on generators fluctuates with the varying reliability of the power grid.
In response to the inconsistent power supply, some sectors have taken proactive measures to ensure energy stability. Isaac Kwesu, chief executive officer of the Chamber of Mines of Zimbabwe, commented on how the mining industry is adapting to these challenges.
“Several of our members have resorted to direct imports of electricity coupled with solar installations.
“These initiatives have significantly reduced their reliance on diesel generators, contributing to the overall decline in diesel consumption,” Kwesu stated.
These adaptations not only reduce operational costs for mining companies but also enhance their energy security, lessening the impact of domestic power supply issues.
The construction sector is also feeling the effects of reduced industrial activity. A source within the construction industry noted, “We are seeing a reduction in machine hours, which leads to a reduction in diesel usage. One of our biggest customers, the mining sector, paused projects late last year due to depressed commodity prices. This has had a cascading effect on our operations.”
The pause in mining projects has led to decreased demand for construction services, resulting in lower operational hours and thus reduced diesel consumption within the construction industry.
Compounding the challenges of power supply are broader economic issues, particularly low disposable incomes among Zimbabweans.
The economic hardships faced by consumers have led to reduced purchasing power, directly impacting the demand for manufactured goods. With warehouses filling up and sales dwindling, manufacturers have been forced to scale back production.
The resulting downtime of industrial machinery has had a significant effect on diesel consumption. As factories operate below capacity, the need for diesel to power machinery diminishes. This reduction in operational activity, driven by sluggish consumer demand, is a key factor behind the decline in diesel usage.
Matsheza explained, “Low disposable incomes are leaving manufacturers with warehouses full of goods.
This not only affects sales but also means machines are running less frequently, leading to decreased diesel consumption.”
Economist Dr Prosper Chitambara believes that while improvements in power supply are a positive development, the persistent problem of load shedding and the broader economic malaise continue to hamper industrial productivity.
For Zimbabwe to see a sustained recovery in industrial output and a corresponding increase in diesel consumption, several factors need to be addressed.
“ZESA must continue to enhance the reliability of the power grid, aiming for a more consistent and widespread elimination of load shedding. This would allow industries to operate without the constant fallback on diesel generators, stabilising energy costs and boosting production efficiency.”
“Economic policies need to focus on increasing consumer purchasing power. Stimulating economic activity through measures that enhance disposable incomes would revitalise demand for manufactured goods, prompting industries to ramp up production and, in turn, increase diesel consumption,” he added.
While the reduction in diesel consumption highlights some progress in Zimbabwe’s power supply landscape, it also underscores the need for comprehensive strategies to address both energy reliability and economic vitality. Achieving this balance will be crucial for fostering a robust industrial sector capable of driving sustained economic growth.-ebusinesswekly
