LOCAL companies are battling rolling power cuts which have pushed overheads as firms turn to costly alternative sources of energy, resulting in depressed output, it has been established.
BERNARD MPOFU
The southern African country is experiencing rolling power cuts lasting up to 15 hours a day as the perennial energy problems continue. Desperate to mitigate the situation which may affect economic growth targets, the authorities are now making frantic efforts to import power from regional power utilities.
According to Zimbabwe Power Company (ZPC) statistics, the country’s five power stations generated 1 250 megawatts (MW) as of Wednesday against an installed capacity of 1960MW. Kariba Power Station, the country’s largest hydro-powered plant, according to the ZPC, contributed 72% of the total energy production during the second quarter ending June, Hwange Power Station contributed 27% while the small thermal power stations contributed only 1% to total energy production during the quarter.
According to trading updates of some listed companies released this week, the quarter ending 31 June had headwinds buffeting the economy.
Official figures show that inflation was on an upward trend as of June, with fuel prices and electricity tariffs trending upwards partly due to pressure from the Russia-Ukraine conflict and excessive money growth.
Zimbabwe Stock Exchange-listed sugar producer starafricacorporation registered a 14% decline in output during the peak period of hot beverages intake.
“This heightened currency volatility has resulted in increased operational costs for the business and reduced consumer spending in the market. The business applauds efforts by the authorities to tame inflation and stabilise the local currency,” says starafrica in its first-quarter trading update.
“For the first quarter of the 2022/23 financial year production volumes of granulated sugar at Gold Star sugars were 14% lower than those attained during the prior comparative period. Power and steam supplies were the main causes of the reduced throughput at the refinery as they negatively impacted on plant uptime.
Consequently, the reduced production led to a 3% decrease in sales volumes when compared to prior year.”
Starafrica has since installed a 11kV dedicated power supply line, procured a 1000kVA generator and electrical cables to augment power supply.
Art Corporation also says it had a bumpy ride during the period ending June.
“The operating environment in the third quarter was extremely challenging as inflation, exchange rate volatility and foreign currency shortages affected production and demand in the local market,” the company says in its third quarter trading update.
The group’s overall volumes for the quarter were held at the same level as the same period last year. Export volumes declined by 6% as orders could not be met due to raw material shortages and the erratic supply of power.
Revenue for the quarter declined by 28% in inflation-adjusted terms, reflecting an increase of 137% in historical terms compared to the prior year. Market distortions continued to present pricing challenges. The auction market backlogs worsened, and raw material imports were sustained utilising foreign currency generated from trading.”
FBC Securities says power cuts and other macro-economic problems affecting the economy will slow down Zimbabwe’s economic growth.
“Unfavourable government policies, perennial currency and power shortages and other prevailing economic challenges continue to hamper productivity, presenting a threat to the country’s growth outlook. While we believe positive outturn remains a possibility, we are of the view that domestic economic growth may be below government projections,” FBC says in a research note.
Finance and Economic Development minister Mthuli Ncube says government focus is on the completion of the 600MW Hwange 7 & 8 project which is expected to ease the power outages.
