Power cuts switch off industry

● Companies suspend shifts ● Costs to go up by 20%

September 16, 2021

PHILLIMON MHLANGA / REGIS CHINGAWO

 

A number of companies have suspended shifts owing to rolling power cuts amid fears the use of expensive diesel generators will increase the cost of production by about 20% delivering the final blow to the already troubled industry, Business Times can report.

Daily power cuts lasting as long as 12 hours have become the order of the day after ZESA lurched into a crisis due to low generation capacity at its hydro-powered station in Kariba and the country’s largest coal-fired plant, the Hwange Power Station.

Inefficiencies at the country’s smaller thermal power stations in Bulawayo, Munyati, and Harare have also worsened the situation.

The power utility is also battling to service debt owed to two regional power utilities, Eskom of South Africa and Hydro Cahora Bassa that hitherto supplied electricity to Zimbabwe to cover its huge deficit.

The impact of unstable electricity supply in Zimbabwe, which is one of the country’s critical challenges at the moment comes at a time when the government is on a drive to lure investment into the country amid fears the power cuts will adversely affect investor confidence.

The Confederation of Zimbabwe Industry (CZI) yesterday said power cuts will be detrimental to the industry.

Manufacturing processes rely on electric machines that require power to perform precise and repetitive tasks to increase production.

Now, the chronic shortages of electricity are starting to damage the economy.

The costs vary from direct economic costs, indirect costs and social costs. Indirect and social costs are equally important components when considering the impact of power interruptions.

Some companies have since suspended some shifts this week owing to power cuts.

“After a long period of stability, this is disrupting the performance of the industry, as power is a critical enabler.

“Power supply shortages due to load shedding will be detrimental to the industry as the gains that have been made so far in capacity utilisation will be eroded.

According to the CZI second-quarter business and intelligence report, capacity utilisation increased to 54% in the second quarter 2021 from 47% in the first quarter of 2021. It is projected to increase to 58% in the third quarter.

However, with the current load shedding, capacity utilisation will likely decline.

“Load shedding results in loss of production time, the marginal productivity of workers will decline, increased cost to businesses looking for alternative power supply and damage to industrial equipment,” CZI said.

Availability of power is one of the key cornerstones of increased production and capacity utilisation for industry, if the government entertains chances of successfully attaining vision 2030, according to experts.

Business Times can report that businesses have lost millions of dollars in potential revenue, threatening the viability of companies.

The Zimbabwe National Chamber of Commerce CEO Chris Mugaga said companies should expect to see production costs going up by between 15%-20% as they resort to costly diesel generators.

“If the load-shedding last September, cumulatively, production costs will go up to 25%. If it goes beyond, we expect the cost of energy to go up by a massive 150%,” Mugaga told Business Times.

He added: “It’s unfortunate, companies have to reposition themselves. In fact, it’s an extension of Covid-19 lockdown. On paper, we are on level 2, but technically, we are on level 5, considering operations are going to be impacted.”

The increase in the cost of production comes as local companies have failed to compete throwing into disarray government plans for an export-led growth.

An economics lecturer at the Midlands State University, Canicio Dzingirai, told Business Times that Zimbabweans should brace for sharp increases in prices of goods as companies turn to costly diesel generators.

“Electricity has been the cheapest source of energy. It’s one of the four pillars of the productive sector alongside ICT, water, and sanitation. The productive sector relies heavily on electricity. It was going to be the stimulator as firms try to recover from the effects of the Covid-19 pandemic,” Dzingirai said.

This means as power outages push costs of production up, the prices of goods and commodities will also go up.”

Domestic consumers have also been hit hard by power outages.

The Consumer Council of Zimbabwe regional manager for Masvingo Province, Ndumiso Mgutshini, said the situation was dire.

He said consumers were now being forced to use other alternative sources of energy yet they would have paid for electricity under the pre-paid method.

“Consumers are now being forced to use other alternative methods of energy such as firewood which exposes them to arrests from law enforcement agencies. The price of gas was recently increased putting the budgets of consumers out of reach,” Mgutshini said.

He said his office was inundated with complaints from consumers after their electrical gadgets were damaged during the load shedding programme.

“We are calling for ZESA to put in place a clear timetable for the load shedding programme and find a long-lasting solution to the problem,” Mgutshini said.

 

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