Exporters to pay 8pc more for power supplies

Zesa Holdings has raised power tariffs for exporters by nearly 8 percent, saying the current rate has become unsustainable, executive chairman Dr Sydney Gata has said.

The new tariff, which takes effect from August 1, 2022, will see exporters such as mining firms paying US10,63c per KwH from US9,86c.

The 9,86c rate is below cost and hence (ZESA) has been failing to capacitate the utility to ensure the security of power supply and efficient service delivery,” Dr Gata said in a letter to the chief executive of Chamber of Mines Zimbabwe Isaac Kwesu, explaining the country’s power situation.

Economists said the mining sector, which has been anchoring the country’s economic growth, and the largest foreign currency earner would “be badly affected.”

“This tariff increase, coupled with power crunch will have an impact on operations of many exporters including curtailing the expansion projects,” Richard Musara, a Harare-based economist told Business Weekly in an interview Thursday.

“Worse still, there will be no guarantee that they will get frequent supplies.
Already, Zesa has warned that import contracts with Zambia and Mozambique may be discontinued at the end of this month as the power utility is failing to pay for the supplies.

The pressure is already mounting from South Africa, currently facing a severe power deficit of 18 000 megawatts due to generation challenges at its plants, to have the power secured by ZESA re-allocated to Africa’s most industrialized economy.

Dr Gata said the supply gap was widening, largely driven by the mining sector, which is targeting US$12 billion in revenue by the end of next year. Last week, President Mnangagwa said the industry had already breached the US$5 billion mark, and expressed confidence that the target would be met, driven by various ongoing projects.

Last year, ZESA received applications for new supplies and current supply increases from the mining industry aggregating to 2 100 MW by 2025, Dr Gata said.

“The increase in the mining industry demand is also inducing other significant industrial loads.”
Dr Gata said after predicting regional supply gaps, ZESA is restructuring supply markets and trading, by directly linking “competent” producers and consumers.

This involved the formation of the Intensive Energy Users Group (IEUG), due to start operating on August 1. Its objectives include directly linking local consumers with Southern African Power Pool regional suppliers to negotiate favorable tariffs.

“After studying the various parameters as operator, distinct from consumer, ZESA realized that the utility and the shareholder are exposed to trading risk, which they have no capacity to underwrite or mitigate,” said Dr Gata. The formation of the IEUG “means assigning commercial and trading risks to parties with requisite capacity to mitigate and underwrite them.”

The IEUG has already adopted a constitution, all regulatory approvals secured and an interim board appointed.

“Customers are being advised of an option to join the IEUG which has potential to negotiate for lower tariffs from regional producers,” said Dr Gata.-ebusinessweekly