HomeBusiness DigestGata clears the air on woes besetting Zesa

Gata clears the air on woes besetting Zesa

WHILE Zimbabwe faces serious power shortages and possible blackouts, the authorities are busy squabbling ahead of a major regional energy crisis next year. Zesa has resorted to load-shedding after failing to access foreign currency to buy spar

e parts and refurbish its power generating plants. Senior business reporter Shakeman Mugari speaks to Zesa Holdings executive chairman Sidney Gata about the pending power crisis and other issues.

Mugari: Why are we having load-shedding?

Gata: We simply do not have enough foreign currency to import spare parts to refurbish some of our plants like Hwange Thermal Station. Added to that is a massive shortage of diesel and coal. We have managed some refurbishments at Kariba but due to forex problems we could not do the same at Hwange. We are operating below capacity. But the major problem now is the uneconomic tariffs which we are charging.

Mugari: What is this about tariffs?

Gata: There has been a tariff freeze for the past three years. Also you need to remember that of all the four tariff increases granted by cabinet to Zesa, none of them was fully implemented. Only one was partially implemented.

Mugari: Why were they not implemented after being approved by cabinet?

Gata: They were not implemented because of the intervention by the central bank which wanted to keep the lid on inflation. You are aware of the recent intervention by the central bank governor.

Mugari: Are you saying that power cuts will stop if you get the tariff increase that you want? Will load-shedding cease as soon as there is a tariff increase?

Gata: Well, the situation will certainly improve but that does not mean load-shedding will stop. Load-shedding will remain because power supply is a function of many things that we are unfortunately not able to control like the supply of foreign currency, diesel and coal.

Mugari: Are you therefore saying there will be more power cuts throughout the year?

Gata: Yes, because, as I said, with that tariff increase we can only manage to a certain extent. The problem will be acute in winter. If we get the tariff increase we will be able to pay Hwange Colliery for coal supplies. We will be able to pay the National Railways of Zimbabwe. But the truth is that even if we manage to pay Hwange there is no guarantee that they will be able to supply us because their machines are too old. In fact they are almost the same age as ours — 22 years. They also need similar refurbishments. Tariffs alone will not eradicate the problem of load-shedding, there is need for a broader approach.

Mugari: So when is load-shedding going to stop?

Gata: When we have an economic tariff review, enough forex to refurbish our stations. We will also need forex to pay for our imports from regional supplies. We will need the whole system from coal (Hwange Colliery) and transport (NRZ). However, for this problem to go away we need our own new generators.

Mugari: When will that be?

Gata: Preparations are underway but for Kariba we will need 36 months and Hwange 42 months. And that’s assuming all the proper funding is there.

Mugari: There are allegations that while you are complaining about (low) tariffs hurting your capacity, it is said Zesa has been living off government subsidies and funding for the past few years. It’s said you are living off the fiscus.

Gata: Those allegations are completely false. They are not true. The government has never given us any money. Even the rural electrification programme which has been taken out of Zesa has been surviving from commercial lending and levies.

Mugari: Are you sure that Zesa has never got a cent from government since 1986?

Gata: Not at all. Zesa has not received a single dollar from the government since 1986. Even in cases where government got a soft loan from bilateral funding, it has always used commercial rates for on-lending to us. All our projects have been self-funded. We never got a dollar from the government.

Mugari: So how much is needed for Zimbabwe’s generating plants to have maximum capacity?

Gata: I would say US$30 million for us to do refurbishments at Hwange like the ones at Kariba. We will then need enough coal and diesel for the stations to start running. That also depends on foreign currency and Hwange Colliery’s capacity.

Mugari: Does that mean you will be able to reopen Munyati, Harare and Bulawayo power stations which have been shut down for some time now?

Gata: That should be possible.

Mugari: How about allegations that you are already stripping parts from these stations to repair the Hwange power station? I mean cannibalising them?

Gata: That is false.

Mugari: What is correct then?

Gata: The truth is that this is not possible because each station has its own specifications. They are not like cars where you can strip one of parts and put on the other. We are not cannibalising the stations. Each station has special specifications.

Mugari: Talking about power security, is there a concrete guarantee that Zesa will be able to provide sufficient energy when the power crisis starts next year?

Gata: I think so, but the challenge is for us to renew our contracts with some of our suppliers in the region. I am sure we will manage. We have since managed to re-negotiate our contracts with Zesco of Zambia and Snel of the DRC. If we maintain those and other standing contracts with HCB of Mozambique and Eskom of South Africa that would be sufficient to get us through the period when the region has a shortage.

Mugari: You will however admit that we are already behind on preparations for the crisis?

Gata: Yes we are behind, but if we can maintain those contracts then the situation would be under control.

Mugari: But some of those contracts are shaky. In fact, the contract with the Mozambican supplier is in danger because we still owe them US$8 million. We also risk losing the Snel contracts because we owe them about US$7 million. Are you therefore sure that we will manage to hold on to the contracts?

Gata: If we manage to pay those suppliers then the situation will be under control.

Mugari: That is understood but indications are that we are not the only country in need of power. Botswana imports, I think 75% of its power. Is Zimbabwe therefore assured that such countries will not snatch the contracts if we fail to pay on time, realising that we have forex problems?

Gata: Yes they could, but as I said, we are working to make sure that does not happen.

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