Zimbabwe’s poor investment climate has hampered socio-economic development in the energy sector despite having a relatively strong energy sector regulatory framework, experts and analysts contend.
Prospects of turning around the floundering economy appear gloomy as Zimbabwe continues to face severe electricity cuts due to several factors, including unsustainably low energy tariffs, failure to pay debts owed to two regional power utilities, limited investment in the energy sector, corruption and a ballooning domestic debt.
Most of the country’s power stations have antiquated equipment and should be refurbished or replaced outright.
The perennial energy crisis has prompted government to craft a Renewable Energy Policy, hoping to ease the energy problems.
But experts say an unstable economic environment characterised by rising inflation and a weakening domestic currency discourages potential investors from considering business opportunities in the energy sector.
Official figures show that Zimbabwe requires 2,300 megawatts (MW) of electricity against current generation levels of less than 1,000MW. To meet this deficit government can only rely on imports from regional power utilities which require at least US$14 million a month.
This means Zimbabwe requires nearly US$170 million annually in electricity imports to meet demand. For a country that is a net importer, any prospects by government of investing in multi-million energy projects could be a pipe dream.
As power cuts continue to disrupt business, forcing many to use diesel-powered generators, government should consider reviewing duty on generators and other sources of energy to ensure the viability of business. The use of diesel powered generators is not only harmful to the environment as fossil fuel adds more carbon to the environment but is also costly to domestic and industrial consumers.
According to a research note by Econometer Global Capital, a local research think tank, government should promote Public Private Partnerships (PPPs and Build Operate Transfer (BOT) arrangements and Joint Ventures to boost investment in the energy sector.
“Zimbabwe has a huge debt overhang which makes it almost impossible for the government to channel resources towards energy projects. More focus should thus be channelled towards inking PPPs.”
Zimbabwe has a huge and diverse renewable energy resource base such as solar radiation, mini-hydro, biomass, municipal solid waste, agricultural and forestry wastes.
In its Report titled: How Public Private Partnerships must evolve to create social impact, the World Economic Forum said such arrangements could ease fiscal pressure on governments while at the same time creating good returns for investors.
“PPPs can be a win-win for all stakeholders concerned. The government body or state benefits by achieving its goals; the private firm has a positive social impact and boosts its revenues; while the customer, or end-user, benefits from the service,” the report reads.
“There are different types of PPPs, including but not limited to Build-Operate-Transfer, Design-Build-Operate, concessions, joint ventures, service contracts, affermages – in which the private company operates and maintains the asset but does not finance it – and leases. The choice depends on the government and the private investor, and also the nature of the project.”
Zimbabwe has large tracts of land available for solar plants and other developments. Projects such as the Gwanda 100MW solar projects in Zimbabwe’s Matabeleland South province, which has been moving at a slow pace, is a glaring example of structural weaknesses in implementing projects.
The country has an average solar irradiation of 20MJ per square metre per day and 3,000 hours of sunshine per year. Coupled with more than 80% mobile penetration rate, high use of mobile payment platforms and a highly literate population, a huge opportunity for solar products sales presents itself. The solar water heating programme has a potential of saving 300 MW from retrofitting existing electric geysers.
As of July 31, 2019, the Zimbabwe Energy Regulatory Authority (Zera) issued more than 77 power generation licences and 70 of these are Independent Power Producers while 42 alone are for solar power projects. But many remain dormant due to under-funding.
Licensed IPP projects have the capacity to generate a combined 131 MW with 74% coming from three bagasse projects, 24% from eight mini-hydro projects and 2% from one solar PV project with biomass standing at 0.50 MW. Licensed IPP projects have a capacity to generate 711 MW and are made up of 661 MW (17 solar projects) and 50 MW (nine mini hydro projects).
Under the light-handed regulation (below 100kW), 433 mini grids have a combined installed capacity of 733kWs. There are not many rooftop solar systems on the ground but planned projects are at hand.
The government intends to embark on a medium to long-term project to generate 2,400MW from Batoka Gorge Project which will be shared on a 50/50 basis with Zambia. In 2018, government completed a $550 million Kariba South hydro expansion project. While the Rural Electrification Agency has been electrifying rural areas, the pace is constrained by inadequate resources, uneconomic and sparsely populated areas rendering the backbone roll out unviable in some cases.