HomeAnalysisGenerators can’t fix the economy

Generators can’t fix the economy

IF there is one thing which clearly demonstrates that President Emmerson Mnangagwa’s government is failing to run the economy, it is the power crisis. The current electricity problems and resultant blackouts engulfing the country — making people’s lives miserable and crippling the economy — cannot be seen in isolation. They are part and parcel of an economy which has tanked and the current multifaceted problems.

Zimind Comment

The mere fact that the economic situation is now worse than what it was when Mnangagwa came in through a military coup after toppling his failed predecessor Robert Mugabe in November 2017 speaks volumes about this administration’s incompetence and failures.

Broadly speaking, the problem is lack of leadership, policy incoherence and lack of delivery capacity. Mnangagwa’s regime came in without a plan and they still do not really have one.

Already reeling from renewed company closures, job losses, low production and falling aggregate demand, liquidity crunch, cash shortages, currency volatility, rising inflation, shrinking disposable incomes and collapsing purchasing power, the economy is sinking deeper. This has fuelled poverty and suffering. However, it is the power crisis which highlights the chaos the most. The power crisis has been prompted by foreign currency shortages, recurrent breakdown of aged equipment, debt and arrears, drought and cuts on imported supplies. Zimbabwe imports additional electricity from neighbouring Mozambique and South Africa. But owing to acute forex shortages, the country has failed to pays its arrears of about US$83 million. This has resulted in drastic cuts in supplies and shortages.

South Africa’s power utility, Eskom, cut supplies to Zimbabwe from 450 megawatts to a mere 50 megawatts. Government recently paid a paltry US$10 million to Eskom to help facilitate talks for supplies to be restored. Zimbabwe, which has not invested enough in electricity generation infrastructure over the years, produces about 900 megawatts against a capacity of 1 800 megawatts. Due to the shortages, rolling load-shedding and power cuts of up to 18 hours a day have become commonplace.

Generators are now being used by individuals and companies to power their activities. As a result, Zimbabwe’s economy — ravaged by inflation scaling 175,6% — is slowly but surely grinding to a halt. Industry, already operating at half its installed capacity and reeling from inefficiencies associated with antiquated equipment and costly production, is becoming even less competitive and in some cases shutting down. The power outages have dramatically increased the cost of doing business, either making companies suffer huge losses or pass the burden to consumers — stoking inflation.

Power outages derail economic growth and are a disincentive to investment. Experts estimate that the power cuts may reduce economic growth by between 2% and 4%. This will spell disaster for an economy already deep in recession.

Mnangagwa’s government must stop misleading the nation on the economy, accept the problems and seek help through an inclusive negotiated settlement which involves Zimbabweans in their political, social and cultural diversity.

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