Power woes hit OK Zim, fuelling costs
OK Zimbabwe Limited says escalating cost of electricity, along with heavy reliance on backup power systems, significantly influenced overall expenses during the half-year period ending in September 2024.
This comes as Zimbabwe has been experiencing incessant power outages affecting the country’s economic growth and competitiveness.
Management said the increased cost of energy supply and power outages were the primary drivers behind a significant increase in their operational expenses, which surged by 16, 29 percent during the review period.
“Expenses went up by 16,29 percent from US$17,3 million in the prior period to US$20,17 million in the current period largely due to the increased cost of energy supply which went up from US$5 million in prior year to US$8,2 million.
“The cost of electricity was driven by increased tariffs while power outages resulted in increased dependence on back-up power, compounding the effects of the increased cost of utilities in the current period,” said OK Zimbabwe chairman Herbert Nkala in half-year review to September 2024.
Speaking at a recent engagement Chamber of Mines Zimbabwe (CoMZ) chief economist Pardon Chitsuro indicated that the chamber expects the Zimbabwe Energy Regulatory Authority (ZERA) to license more power projects to support the ever-growing electricity demand.
“We see demand increasing in the outlook as most mining companies are in an expansion mode, some previously closed mines are reopening given the current commodity price boom so we expect a jump in terms of demand.
“We expect that ZERA is going to license more power projects as well as facilitating direct importation of power to supplement what we have, we also advocate for prioritisation of the industry in terms of the available power,” said Chitsuro.
The energy landscape in Zimbabwe is currently plagued by substantial power supply deficits with peak electricity demand consistently exceeding the available generation capacity, a situation compounded by ongoing systemic inefficiencies. Just this week, some areas where OK Zimbabwe has branches, have been going for days without power supply.
Power shortages are estimated to cost Zimbabwe 6,1 percent of its GDP per year, comprising 2, 3 percent in generation inefficiencies and 3, 8 percent in downstream costs which reflect the broader economic impacts of unreliable power supply.
The situation has been exacerbated by the effects of El Niño during the 2023/24 season, which led to significantly reduced water levels and diminished electricity generation capabilities at Kariba, one of the primary sources of electricity for the country.
Ageing infrastructure is significantly contributing to this energy crisis, leading to frequent breakdowns, outages, and decreased operational capacity across the power generation sector.
Currently, Zimbabwe’s daily peak electricity demand stands at 1,900 megawatts, however, the average daily power generation from the country’s major power stations, notably Hwange and Kariba, has been around 750 megawatts in the last 5 days.
This shortfall has consequently resulted in frequent and prolonged power outages, exceeding 24 hours per day in some places.
Adverse impacts of these outages extend beyond the retail and manufacturing industries, severely affecting essential sectors such as mining, agriculture, and tourism.
This relentless energy crisis has translated into lower economic growth.
In particular, the mining sector faces acute challenges related to securing reliable electricity supply.
Mines that lack access to dedicated power lines are experiencing severe and continuous outages, which hinder their ability to meet production targets.
As a result, mining companies have been forced to increasingly depend on more costly energy sources, such as diesel.
Rising costs associated with the procurement of these alternatives have created significant operational viability issues for mining entities.
The mining sector is crucial to Zimbabwe’s economy, accounting for approximately 60 percent of the nation’s export earnings and making a substantial contribution to the national GDP.
Addressing energy challenges requires increased investment and more effective management strategies to ultimately achieve universal access to electricity in the country.
Government has however been enhancing its focus on diversifying energy sources by investing in new infrastructure.
A noteworthy development is the recent construction of the Hwange Thermal Power Station Units 7 and 8 Project, which successfully added 600 megawatts to the national grid.ebisnessweekl
