HomeBusiness DigestIndustry casts doubts over output targets... as deepening power crisis compounds headwinds

Industry casts doubts over output targets… as deepening power crisis compounds headwinds

BY TAURA MANGUDHLA

INDUSTRIALISTS this week cast doubts over the manufacturing sector’s ability to achieve ambitious production targets projected by the Confederation of Zimbabwe Industries (CZI), saying a debilitating power crisis experienced throughout this year had emerged as the biggest hurdle.

In May, the CZI projected stronger rebound in industrial capacity utilisation, saying with the foreign currency auction system injecting cheaper funding into industries, manufacturers would overcome a sea of headwinds and increase output.

Zimbabwe’s biggest industrial lobby said capacity utilisation would reach 61% at the end of this year, a marked improvement from 47% in 2020, and 36% in 2019.

At the heart of the projected rebound was the good rainfall season, a massive Covid-19 vaccination programme and positive spinoffs from the foreign currency auction system, which had injected US$1,7 billion into exporting firms by July this year.

However, the foreign auction system has been hit by extensive problems, with companies taking up to 15 weeks to receive allotted funds, according to the CZI.

This has been compounded by the power crisis, which has returned to haunt sectors across the economy, with some industrial sites battling blackouts of up to 12 hours a day.

State-run power producer, Zesa Holdings Limited has been struggling to shake off serious faults at the 920-megawatt generating Hwange Thermal Power Station, a key producer.

Hwange is undergoing a US$1,6 billion expansion programme, which is expected to address power shortages from 2022.

But for now, hundreds of firms have been running on expensive diesel-powered generators to sustain operations after the crisis returned to haunt industry.

Industrialists said in the absence of a concrete solution, growth targets could remain a pipedream.

In an interview with businessdigest, Chamber of Mines of Zimbabwe chief executive officer Isaac Kwesu confirmed that mines had slipped back into fresh pressures.

“Lately our industry has observed increased incidences of power outages, especially the mining houses that are not connected to dedicated power lines,” Kwesu said.

“We have also noted some intermittent power outages, which are a result of faults and poor quality of power. We are currently engaging Zesa to resolve the challenges.”

Mining companies, including the Zimbabwe Consolidated Diamond Company and Blanket Mine, one of the country’s biggest gold producers, have announced plans to establish multimillion-dollar solar plants, which are at various stages of completion.

The mining industry has been placed at the heart of a massive effort to rebuild Zimbabwe’s economy, with the government lining up a strategy to increase revenues to US$12 billion by 2023, from about US$3 billion currently.

Other sectors expected to underpin recovery are manufacturing, agriculture and tourism, all of which have been held back by a string of problems in the past year.

An executive with Chinese mining firm, Ming Chang Sino Africa Investments told businessdigest last week that apart from Zesa’s deteriorating capacity to transmit power to industries, the quality of electricity has recently been compromised.

Ming Chang said it would be sticking to diesel to power its new automated brick moulding plant in Kwekwe after noticing that power from the national grid was failing to run the machine, triggering extensive damages to bricks.

“When power goes out, it is not companies that can afford the generators,” Joseph Gunda, chief executive officer at the Zimbabwe Stock Exchange-listed General Beltings, told businessdigest. “It is an additional cost because fuel prices have increased and this affects the bottom line. We implore Zesa to improve because outages in industry affect the business, the final product and the economy in general.

“Power is a key determinant for productivity and capacity utilisation. Definitely, this has a huge impact on productivity,” Gunda, who is the immediate past vice-president of CZI, added.

He said lost production times meant that companies were forced to pay for some costs, including salaries, when such services had not been given.

This week, Energy and Power Development minister, Soda Zhemu said the government was negotiating fresh power deals with Zambia and Mozambique to limit the impact of rolling blackouts.

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