No power to the people
By Francis Harawa
Friday, 10 September 2010 18:19
HARARE – In the late 1990’s, as Zimbabwe’s economy began to stutter, the
Zimbabwe Electricity Supply Authority (Zesa) chief executive Simbarashe
Mangwengwende began to worry about the organisation’s advertising punchline
“ZESA: the power that drives the economy.”
He felt that it could be misconstrued that the economy was slowing down
because there was not enough power to drive it. He was right to fret.
As the decade wore out, Mangwengwende realized that inordinate delays in
implementing the utility’s System Development Plan (SDP) — a comprehensive
plan to beef up power generation, strengthen the grid and ensure the system’s
robustness – were going to impact negatively on the country’s power needs
going forward.
Mangwengwende had helped draw the SDP in the wake of one of the worst
droughts in the region in 1992. That year, Lake Kariba, one of the biggest
man-made lakes in the world, recorded the lowest inflows since records
begun.
The then minister of energy, the late Herbert Ushewokunze went to Zambia to
negotiate with that country’s power utility, ZESCO, to provide electricity
from their Kariba North power station. Ushewokunze returned to Harare to
consult with government officials only to find that the Zambians, aware
Zimbabwe was desperate for power, had increased the price.
A furious Ushewokunze had no choice but take the power at the price he had
been offered.
Approved by Cabinet in 1992, the SDP became the blueprint to resolve the
looming power shortage which had the potential of crippling, agriculture,
industry and commerce. To cushion the Zimbabwe system from the vagaries of
weather, the SDP sought to link the country’s grid to the South African
system which relied on coal and was not affected by the vagaries of
weather — but cost more.
But the SDP soon ran into problems.
The interconnector projects to South Africa and Mozambique took off, albeit
with some delays, ensuring steady power imports until 2003 when contracts
were to be renewed.
Power imports from the two neighbouring countries – SA and Mozambique — and
the volatile Democratic Republic of Congo (DRC), were to be used as a
stop-gap measure while Zimbabwe built new generation capacity. South Africa
had indicated they would not be in a position to provide power beyond 2003
when import contracts expired because their demand trajectory showed there
wouldn’t be enough power for the country, let alone to export.
But South African President Thabo Mbeki decided that the new power
generation projects for SA should be shelved, only admitting the fact after
the country faced severe shortages which threatened industrial growth and
the hosting of the World Cup.
For Zimbabwe, it had been planned that Batoka, down stream from the world
renowned Victoria falls, be a run-of-the- river power project to come online
by 2004 – it required no water reservoir to minimize environmental impact.
It would have a north (for Zambia) and south bank (for Zimbabwe), each
generating 800 MW, to be buildt at a cost of US1.6bn.
The Zambians were not interested. They claimed they had been short-changed
in the sharing of the assets of the Central African Corporation (Capco)
which included the Kariba and Munyati power stations. Capco had been formed
during the failed Federation of the Rhodesias and Nyasaland and had built
the two power stations.
In addititon, the Zambians felt they did not need more power because copper
prices then were depressed. When it was suggested that they sell the cheap
hydro power to South Africa to earn foreign currency until such time as they
would need the power, they would not budge.
Zambia is now building a new power station at a higher cost when it could
have built one at a lower cost. Hydro power stations last longer and are
cheaper to maintain.
Failure to implement the Batoka affected the Kariba South extension project.
It had been planned to maximize water usage so that water used at Batoka
would pass through an extended Kariba down river.
The next project planned for implementation was the extension of Hwange by
adding two new 300MW generators to be operational by 2001 and 2003. The
World Bank was prepared to fund the project. But when tenders had been
adjudicated, Government decided the tender be given to YTL of Malaysia, a
company that belonged to the son of then Malaysian premier Mahathir Mohamed.
The problem was that YTL was not a power construction company: it
specialized in high-rise buildings.
Government later changed its mind and decided to sell Hwange thermal power
station to Malaysia for a paltry US$350m. At that time, the station provided
half of the country’s 1 800 MW power needs
It had taken ten years to build Hwange power station. The late rebel leader,
Ian Smith had started building Hwange in 1976 during the height of the
guerrilla war and mandatory UN sanctions. The station was completed after
independence in 1986 when the power utility ZESA was formed.
Smith had mixed technologies from those willing to bust sanctions. By the
mid-1990s it was decided to refurbish the power station to improve its
operational efficiency, standardize equipment and computerize controls. The
World Bank provided US$800 for the refurbishment.
The Malaysians, opted out of the deal by refusing to pay the World Bank
debt. After the collapse of Batoka, yet another opportunity to increase the
country’s generation capacity had gone begging.
1997 was a watershed year for Zimbabwe for a number of reasons.
President Mugabe sent the then agriculture minister Kumbirai Kangai and then
Party Chairman John Nkomo to London to ask for funds to buy land from white
commercial farmers for redistribution to land-starved blacks.
They came back empty handed. Relations between the British and Mugabe
chilled, then froze. This affected a number of Zesa projects. Sengwa in
Gokwe North, which has 100 years of coal reserves had been brought forward
and its capacity increased to 1 400MW. Four new 350MW coal-fired units were
to be built for commissioning by 2003 and 2004.
The international mining giant Rio Tinto was to mine the coal while National
Power of the UK was to build the power station on a Build Operate and
Transfer basis. Also on the cards, ware the Lupane Gas turbines, to be built
by the British.
Both projects froze in the political chill.
In November 1997, Mugabe buckled under pressure from war veterans and paid
them Z$5billion of printed money, after his party’s big wigs had looted the
first Z$5bn in the early 90s. The second amount was looted too. But money
printing eventually devastated the country’s economy which ended up with a
worthless currency.
Zesa was asked to contribute Z$88m to the war veterans’ pay packets, despite
the printed money. Government said the contribution was a dividend or half
of the annual profits for the years 1995 to 1997. The utility didn’t have
the money. Organisations don’t keep profits locked away in vaults for future
use. Zesa had to borrow the money from the expensive money markets despite
the fact that, government had not put a cent in Zesa, except to guarantee
loans from international
organisations.
As it turned out, the guarantor later failed to pay back loans from the
World Bank, IMF and the African Development Bank.
The printing of the Zimbabwe dollar sent the currency into a downward
spiral. Zesa’s power import bill jumped overnight from Z$360m, to over
Z$700m and kept increasing. The increases could not be met from tariff
hikes. In one fell swoop, the parastatal, once regarded by the World Bank as
one of the best run power utilities in Africa, lost its profitability and
began its descend to mediocrity.
Planning became a nightmare under a currency whose value kept receding. Debt
servicing became impossible as the local equivalent of the US dollar
ballooned disproportionately.
On the day the war veterans were paid, 11 November 2007, the local bourse
crashed and there was a nationwide blackout – an event that became known as
“Black Friday” and marked the beginning of the dark ages for the country.
In order to implement the SDP, it had been planned to factor the cost of the
new projects into the tariffs. A study called the long run marginal cost
pricing (LRMCP) had been carried out to protect consumers from sudden sharp
increases. This was to be done over a three-year period from 1997 to 2000.
Government never acceded to the implementation of the LRMCP tariff; neither
did it allow the utility to implement cost-based tariffs, fearing the
political implications of the increases.
As a result, consumers got electricity below cost price when they could
afford to pay in the mid 90s up to about 2000. And when they could not
afford to pay, because of a collapsed economy following a ten-year meltdown,
the utility tried to charge electricity at cost price.
Politicians had pretended they were protecting the consumer and were acting
in the public interest, but the consequences of their decisions have come
back to haunt the public which is suffering prolonged blackouts and the use
of costly alternatives -firewood and paraffin for the poor and generators
and gas for the well-heeled.
The Zimbabwe’s power crisis can only be solved by building new generation
capacity. Unfortunately, a lead time of up to five years and massive capital
is needed to build a power station. The Zimbabwe government cannot raise the
sums required and independent power producers are reluctant to invest in the
country with skewed property rights and new indigenisation rules which
require foreign firms to cede 50 percent of the shareholding to locals.
Political talk is that the Chinese will build Sengwa, but many are
skeptical. There is reluctance from Mugabe’s eastern friends to invest after
he failed to pay back moneys owing on the refurbishment of Zisco’s furnace
number four. Vice President Joyce Mujuru recently said the Chinese were not
keen to take up projects given to them on a silver plata.
Some questions remain unanswered. Are the Chinese going to build the power
lines that are going to carry power from the Sengwa to the power demand
centres? That too requires massive investment?
Finance Minister Tendai Biti recently came back from a visit to China with a
briefcase full of bilateral agreements and no funds.
It has become clear that unless the country has enough electricity,water and
a credible property rights policy, the much talked about industrial take
off will not materialise.
Meanwhile, there is no power to the people.