Energy shortages to drive trade deficit in Q4 2022

Zimbabwe is starring down a barrel in terms of trade balance as the country has been plunged into darkness for at least 19 hours a day for the past 10 days.

This comes as the country is facing power generation problems due to depleted water levels at Kariba and a never-reliant Hwange power station, which has forced industries, retailers, and households to use alternative sources of power.

While the country was already importing power from the region, plans are to increase imports as a short-term measure to solve the power crisis and save economic growth.

Economists and analysts have said the situation will result in more imports of diesel to power generators and electricity in order to replace the lost power.

Economist Dr Prosper Chitambara said, “The country needs to find a solution as quickly as possible because the current situation will make every prediction by the Treasury fall by the wayside. As a result, the import bill will increase in the meantime.”

In the second quarter ending June 2022, the country imported goods worth US$2,1 billion including electrical energy worth US$42,4 million and diesel worth US$224,4 million. Exports during the period were US$1,6 billion leaving the country with a second-quarter deficit of US$500 million.

Getting into the third quarter ending September 2022, the country exported goods worth US$2,25 billion and imported goods worth US$1,59 billion leaving the country with a quarterly trade deficit of US$660 million.

During the third quarter, electrical energy imported was US$54,5 million and diesel imported dropped to US$205,58 million. However, analysts see the imports increasing in the current and next quarter as a way to cover for lost power generation.

Economist Takudzwa Maradze said, “The power crisis, if not resolved, will have a very serious impact on the import bill. It will increase the cost of doing business as companies turn to diesel for powering their generators because if they do not, it may make a lot of economic activity impossible.”

Veteran economist Prof. Tony Hawkins said, “The country is in a dire situation as there is no hope of a solution rather than to rely on the rainy season for relief around mid-February or so.

‘‘As a result, our trade balance is going to fall into deficit even more in the current and the next quarter.”

“This is a crisis situation,” Energy Minister Soda Zhemu told a news conference last week, adding that the Kariba plant will be shut down completely during the Christmas period until the water situation improves.

On Tuesday, the country was importing 50MW from Mozambique’s HCB, up to 169MW from ESKOM, 100MW from Zambia’s ZESCO and 10MW from EDM in Mozambique.

According to Eng Dr Magombo the country has agreed with EDM to increase supplies to 50MW up from 10MW, while there is an agreement for a further 150MW from Mozambique.

Despite all these efforts, the country will remain far below the daily demand of around 1 700MW which will see the country importing more diesel to cover for increased demand.

With low energy supply, companies will move to reduce production hours due to the increased cost of production and investment analyst and economist Enock Rukarwa believes it will also drive finished goods imports.

“Yes, the situation will definitely see an increase in energy imports and diesel imports, but it will also increase the importation of finished products to cover for the loss of production hours that we are currently experiencing,” Rukarwa said.

He added that the country will feel the pressure on foreign currency demand in the current quarter and the first quarter of 2023 as people are entering a massive spending season which means more imports will be needed to cover the production gap.-ebusinessweekly