THE price and affordability of electricity plays a huge role in a country’s economic progress.
Challenges on the national electricity grid can impede the growth of local businesses, job creation and economic growth. Thus, whatever they may be, those challenges should be addressed decisively.
Zesa Holdings is the monopoly dominating the country’s energy sector. It has complete control over the national electricity grid.
It is solely responsible for the country’s power stations, including electricity transmission and distribution infrastructure (transformers, transmission cables).
Any independent power producers, who supply energy to Zimbabwe’s national grid (transmission infrastructure), do so in collaboration and with the approval of Zesa.
However, as it stands, Zimbabwe has encountered a lot of challenges regarding energy. That is why it is essential to review the status of Zesa and its operations in order to come up with resolutions to electricity issues in the country.
Challenges at Zesa
By November 2024, it was reported that the Zimbabwe Electricity Transmission and Distribution Company (ZETDC), a subsidiary of Zesa, owed Hwange Electricity Supply Company (Hesco), which operates units 7 and 8 at the Hwange thermal energy plant, a huge US$430 million in debt.
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At the time, reports indicated that the debt emanated from power, which was generated from the Hwange units and fed into the national grid.
This infers that Zesa has been unable to profitably sell electricity to the rest of Zimbabwe. If that is not the case, then it reflects leadership incompetence or poor governance at the utility.
It is also noteworthy to mention that Hesco is itself co-owned by Zesa and China’s Sinohydro Corporation. By introducing such a co-owned separate company, it is possible that Hesco works with different goals from Zesa’s own, which may not be in the public interest.
Particularly concerning is that Hesco could be working with a profit mandate and not purely in the public interest. The challenge with this is that, if Hesco seeks to make super profits from the electricity, which it sells to Zesa, Zimbabwean electricity consumers would end up paying exceedingly high electricity tariffs, in order to settle Hesco’s charges.
If Zesa does not pass the high Hesco margins to consumers, then it could end up with unsustainable debt itself.
Zimbabwe’s peak electricity demand is estimated to be around 2 300 MW, against actual power generation of only around 1 800 MW. This leaves a deficit of supply of around 500 MW, on the existing grid.
Part of the shortfall is usually bridged through imports from neighbouring countries, such as Mozambique, South Africa, and Zambia.
However, these arrangements are often strained by Zimbabwe’s failure to service its debts. In 2020, for instance, Zesa had to negotiate a US$70 million foreign loan, to clear arrears with South Africa’s Eskom and Mozambique’s Hydro Cahora Bassa.
Such situations bring into question, the feasibility of Zesa’s electricity tariffs. Surprisingly, officials at the utility insist that they are selling electricity at a loss, since the consumer price is below cost of production.
Comparing Zesa’s tariffs to those charged by neighbouring countries is, however, made difficult by the challenge of the appropriate Zimbabwean exchange rate to use, between the official and parallel market exchange rates, which are inherently different.
Zimbabwe’s foreign currency black market is the more prominent one of the two, and complements the smaller formal forex market.
In 2017 and 2023, an online Zimbabwean blog called TechZim, reported that Zimbabwe’s electricity tariffs were higher than regional averages for Botswana, Zambia and other neighbouring countries. This is in contradiction to Zesa officials, as mentioned earlier.
As of 2023, TechZim’s research found that Zimbabwe’s residential electricity tariffs were on par, with Johannesburg, even when the Zimbabwean currency was translated using the parallel market exchange rates.
TechZim reported that average Zimbabwean residential electricity tariffs were around US$0,13 per KWh (kilowatt hour). By inferring that Zimbabwe’s average tariffs were similar to those of Johannesburg, the findings essentially condemned Zimbabwean tariffs as exorbitant.
That is because Zimbabwe has lower economic activity than South Africa, which means that local people have access to less economic opportunities and earn less than the residents of Johannesburg.
Moreover, Johannesburg’s electricity is more expensive than electricity in all other regions of South Africa, since it is the capital city.
Thus, if the whole of Zimbabwe has tariffs, which match Johannesburg that in itself reveals tariffs which are over-priced.
Power cuts, due to problems at Zesa’s power generation units and on the transmission and distribution grids, remain problematic. This is obviously unfavourable for businesses and households, who are affected by the intermittent cuts.
Another major challenge is energy wastage, which is estimated to be around 300 MW, or 20% of Zimbabwe’s national supply. These figures were confirmed by Victor Sibanda, research and energy efficiency engineer at the Zimbabwe Energy Regulatory Authority (Zera), at an official media engagement, in 2024.
This wastage stems from inefficient equipment and careless use of electricity, on the part of energy consumers, underscoring the need for improved efficiency standards across the country.
Some local power stations have become more unreliable and underperform, due to their outdated technology and infrastructure. The two largest power stations, Kariba South Hydro Power Station, and Hwange Thermal Power Plant (coal-fired), for example, were built over 30 and 60 years ago, respectively.
Purchases of renewable energy from independent producers has also been taken up by Zesa, in an effort to decarbonise the grid, and achieve Zimbabwe’s climate change mitigation targets, as communicated on reputable international platforms such as the United Nations Framework Convention on Climate Change (UNFCCC).
At their peak, the independent producers supply around 70 MW to the national grid. However, renewable energy is known to be more expensive than coal and hydro electricity, since it typically operates at much lower levels than its installed capacity and is weather-dependent.
In essence, the more renewable energy producers that Zesa sub-contract’s, the greater the upward pressure on Zimbabwean electricity prices.
Electricity theft, including illegal connections has been reported to be problematic. However, publicly accessible data does not provide details on the extent of the theft and how much of a threat, it poses to Zesa.
In South Africa, for example, the energy utility — Eskom, reports that energy theft costs it a massive US$1,3 billion, per year. Although Eskom’s problem is grave, its extent is known.
Zesa could do well to also get more informed data regarding the extent of energy theft from the grid. And also provide solutions to counter it.
Possibilities for reform
As has been described above, Zesa and Zimbabwe’s electricity tariffs are not in the best state that they could be. Thus, it will be essential to make changes in order to address some of the challenges associated with them.
Regarding the huge Hesco debt and the massive monthly US$36 million required to access energy from Hesco (Hwange units 7 and 8), it is essential to have the Zimbabwe Energy Regulatory Authority (Zera), confirm if Hesco’s costs are in accordance with what it claims.
That is because if Hesco’s costs are inflated, it is the Zimbabwean electricity consumers, who end up paying the price, through high electricity tariffs.
After ascertaining Hesco’s costs, Zera also needs to ensure that it only makes minimal profits through their operations. Super profits would be problematic.
Zera’s interference would not be an uncommon thing, since energy regulators in other countries also limit profits from energy sales, in order to promote the public interest.
Central government might also need to take over Zesa’s outstanding foreign debt, which has been reported to be around US$2 billion, in total.
This will enable Zesa to have a lower cost structure, with less finance costs, making room for lower electricity tariffs in the country. In the public interest, central government can also, provide grants to Zesa for the establishment of new coal power stations.
Such free funds would make it possible for Zimbabweans to get some of the cheapest electricity in the world, since Zesa would only charge tariffs based on recovery of operational expenses.
This, however, can only be attempted when the economy has grown, becomes more formal and government tax collections have recovered.
Zesa may need to halt sub-contracting more renewable energy producers, since they produce relatively expensive energy. Regarding the country’s emissions reduction commitments per UNFCCC, the government should invoke provisions for special and differential treatment (S&DT). This allows developing economies to continue increasing emissions, until they can afford large scale renewable energy deployments.
Smart and prepaid electricity meters should also be deployed, in order to avoid non-payment by energy consumers. The meters can be invoked to remotely manage consumer energy consumption, in periods of peak electricity demand, without having to implement load shedding. They are temper-proof and can report if the consumer tries to illegally connect to the grid.
Zesa needs to implement impeccable research to determine the extent of electricity theft that it is subject to. Of equal importance are, robust responses designed to address the theft. Governance issues, which compromise Zesa’s viability need to be addressed through a system, which financially-rewards whistle-blowers who report relevant criminal activity.
For instance, when whistle-blowers assist to avert economic crimes, or to facilitate the recovery of pilfered goods, they should be paid, between 1-10%, of the value that they help Zesa to redeem.
Part of what they are to be rewarded with, can be funded from fines to be charged on apprehended perpetrators of the criminal activity. This intervention should cover all types of economic crime, including illegal electricity connections, fraudulent electricity tokens, public procurement corruption, vandalism, sabotage, infrastructure (cables, transformers) theft, etc.
Introducing money as an incentive can help to rapidly curtail further deterioration of the country’s electricity assets.
If the clusters responsible for finance, in government, could bring clarity to the exchange rate question in Zimbabwe that would make it easier for both Zesa and energy consumers, to understand Zesa’s pricing regime, whether it is over- or under-priced.
Kevin Tutani is a political economy analyst - [email protected]
