HomeLocal NewsPower outages push industrial production costs up by 150%

Power outages push industrial production costs up by 150%

KUDZAI KUWAZA

INTENSIFYING power blackouts confronting Zimbabwe’s industries have inflicted fresh pain across companies, with overheads rocketing by 150%, industrialists told the Zimbabwe Independent this week.

They cast doubts that a 61% capacity utilisation target projected by the Confederation of Zimbabwe Industries (CZI) this year would be achieved, unless production bottlenecks and spiraling overheads are addressed.

Industry leaders revealed shocking evidence of needless waste, with work in progress frequently being turned into waste as machines are grounded by prolonged outages, while perishable products have also been affected.

This means some operators are being forced to import the same raw materials stock during a period when foreign currency shortages have intensified.

There are fears that manufacturing firms could lose key contracts. Industrialists said much of the new cost pressures were stemming out of the switch to expensive diesel-powered generators, as state-run power producer, Zesa, battles to keep its ageing plants running.

Zimbabwe National Chamber of Commerce (ZNCC) chief executive officer Christopher Mugaga said apart from generators, industries were running on solar power.

“The impact of the power outages is a very serious one,” Mugaga told the Independent. “On average, the monthly cost of doing business has gone up by 150%, which is not a small figure by any stretch of the imagination.”

He spoke after the CZI had projected three weeks ago that 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 rains received in the past season, a massive Covid–19 vaccination programme and positive spin-offs 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 deadly power crisis, which has returned to haunt sectors across the economy.

The development pushes industries further to the brink after spending about three weeks in July producing at low capacity after disruptions at South African ports, where most of the country’s raw materials requirements land from overseas before being transported to Harare.

CZI president Kurai Matsheza confirmed that the optimistic projections had been replaced by anxiety.

“These power cuts are really punishing industry, especially in the manufacturing sector,” Matsheza said. “The power cuts are disturbing operations and companies have made serious losses as some of the products have to be thrown away after the production cycle is interrupted by unplanned power disruptions. Because of these power outages, the projection we made of capacity utilisation of 61% may fail to be achieved.”

Newly elected Employers’ Confederation of Zimbabwe president Demos Mbauya said the power outages had increased production costs.

“There have been increased production costs as companies use alternate means of power. For example, running heavy duty machinery on diesel,” he said. “The demand for imported goods will increase at the expense of local goods. This development will lead to an increase in the demand for foreign currency, thus creating shortages that will trigger the exchange rate to fluctuate upwards.”

Zimbabwe National Farmers Union CEO Edward Dune decried the adverse impact of the power outages on farmers.

“Power outages have caused a real nightmare to both field and horticultural crops because of compromise of quality issues associated with the resultant intermittent dry spells,” he said. “Winter wheat at grain filling stage requires full cycles of irrigation water which is not the case in event of power outages. Similarly, all other irrigated horticultural crops need adequate water if quality has to be guaranteed; especially export commodities, where producers are expected to meet certain certification standards.”

Cabinet last month projected 298 961 metric tonnes (mt) output, but farmers this week said the country was unlikely to meet this target.

Breakdowns have been felt the hardest at the 920-megawatt Hwange Thermal Power Station, which is currently undergoing a US$1,6 billion upgrade to replace facilities that were acquired more than three decades ago.

There has been minimal interruption to the Kariba South Hydroelectric Power Station since government injected US$553 million to expand capacity before commissioning in 2018. But the facility was temporarily affected by scheduled maintenance about a month ago, triggering the rolling power outages of up to 12 hours.

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