Mthuli pins hope on reforms

STAFF WRITER

Reforms that attract private sector investment in the energy sector are key to solve the country’s debilitating power crisis that has threatened business and also affected ordinary citizens, a senior government official has said.

Zimbabwe has been faced with probably the worst power crisis in recent times that has seen total nationwide shutdowns occurring regularly in the last weeks.

The power cuts have affected industry particularly the mining, agriculture and retail sectors.

During a budget debate, Finance, Economic Development, and Investment Promotion Minister Professor Mthuli Ncube emphasized the progress made in incentivizing independent power producers (IPPs) and securing energy sustainability.

The government has also adopted a multi-faceted approach aimed at enhancing the capacity of the national grid while encouraging private sector participation.

“The Ministry of Energy and Power Development’s role is to create a regulatory framework and an enabling environment for private investors in power generation. Working alongside Treasury, we have addressed key concerns raised by independent power producers,” said Prof Ncube.

Some of the measures include economic tariffs, government guarantees and  access to foreign currency.

The government raised the electricity tariff to $0.16 per kilowatt-hour, exceeding the $0.10 per kilowatt-hour profit benchmark for IPPs. The revised tariff offers a solid margin to attract and sustain private investment.

Treasury now provides guarantees on power purchase agreements (PPAs). In the event of default by the Zimbabwe Electricity Transmission and Distribution Company (ZETDC), the government steps in to fulfill payment obligations, reducing investment risk.

Another measure is the issue of access to foreign currency. IPPs are assured access to foreign currency for servicing external debts and repatriating dividends. This reform alleviates a critical bottleneck for international investors.

“These interventions are already driving interest from local and international energy investors,” Prof Ncube noted.

The private sector has responded positively to the government’s initiatives. Prof Ncube highlighted recent partnerships between ZESA and foreign investors to enhance transmission infrastructure. Additionally, companies in mining and heavy industry are investing in their own energy solutions, such as solar and coal power plants, to reduce reliance on the national grid.

“Mining companies like Zimplats, PPC, and Manhize are setting up their own power stations, which not only ensure their operational continuity but also lessen the burden on the national grid,” he said.

Despite the progress, ZESA continues to face financial challenges due to widespread payment defaults. While residential and small business users are on prepaid meters, larger industrial consumers still rely on postpaid systems, leading to arrears.

“To address this, ZESA is expanding its prepaid and net metering programs to include all customer segments. By improving revenue collection, we can reinvest in infrastructure upgrades,” explained Prof. Ncube.

The Minister told the National Assembly that the reforms, including competitive tariffs and guaranteed foreign currency access, have already begun to bear fruit.

Zimbabwe’s electricity challenges stem from a combination of aging infrastructure and low water levels at the Kariba Dam.

The demand for electricity, estimated at over 1 700 megawatts (MW), often far exceeds the available supply, forcing households and industries to endure prolonged load-shedding.

In recent years, reliance on electricity imports from South Africa and Mozambique has been unsustainable due to regional supply constraints and payment arrears. The effects of these shortages have rippled through Zimbabwe’s economy, hampering industrial production, agricultural operations, and small businesses.

Legislators called for increased funding for the Ministry of Energy and Power Development to expedite projects aimed at resolving the energy crisis. Prof Ncube acknowledged the need for additional resources while emphasizing the government’s focus on leveraging private sector investment rather than solely relying on state funding.

“We are fine-tuning policies to ensure a sustainable energy sector. The government’s role is to create a framework that empowers private players to invest with confidence,” he said.

The power crisis remains a significant impediment to economic growth. Industries operate below capacity, agriculture suffers from unreliable irrigation systems, and job creation is stifled. By prioritizing energy reforms, the government aims to unlock Zimbabwe’s economic potential and improve living standards for its citizens.

While the government’s reforms are showing promise, sustained effort and collaboration are essential to achieving energy security. Key focus areas include diversifying energy sources, modernizing infrastructure, and addressing operational inefficiencies within ZESA.

“Energy is the backbone of our economy,” Prof Ncube stated.

“The government is committed to building a resilient and sustainable energy sector that supports economic growth and improves livelihoods for all Zimbabweans.”