$35m bailout to avert power crisis

Source: $35m bailout to avert power crisis | The Herald October 17, 2016

Felex Share Senior Reporter—
Government has averted a potential electricity crisis by issuing a R500 million ($35 million) guarantee to South Africa’s power utility, Eskom, to back up power imports from the neighbouring country. Eskom, which supplies Zesa Holdings with 300 megawatts, recently wrote to the power utility threatening to cut supplies over a $12 million debt. Erratic power supplies have a negative impact on industry and the agriculture sector.

Following the provision of the guarantee, the onus is now on Zesa to ensure it meets its obligations on time. Sources yesterday said the guarantee to Eskom was issued last week. “A looming disaster has been averted, but that does not mean Zesa has to relax because still the debt has to cleared,” said a source.

“In the event that Zesa fails to pay, Eskom will simply call up the guarantee and Government will have to pay the money. This is a burden if Zesa does not pay up. Because in the National Budget, that guarantee is not factored in, it means something budgeted for will have to suffer. Legally, Government is saying I am standing behind Zesa.”

The source said Zesa management must be rigorous and innovative to recoup $1,1 billion owed by consumers. This, said the source, was the only way the power utility could service its debts. “The guarantee will only be used as a last recourse in the event that Zesa fails to settle its bills,” he said.

“What Zesa needs to do is to ensure it settles its bills and for that to happen, it needs the support of everybody, including the Reserve Bank of Zimbabwe. Customers also have to respond positively as it is also in their interests.” Zesa also owes Mozambique’s Hydro Cahora Bassa $10 million.

Zesa chief executive Engineer Josh Chifamba yesterday declined to comment on the guarantee, referring questions to the Ministry of Energy and Power Development. He, however, said the power utility was putting in place measures “to avoid load- shedding at all costs”. “We are working hard to ensure there won’t be any load-shedding. We are going to be talking this coming week with our customers who are into exports with a view to see if they can give us part of their allocation such that we have foreign currency and are able to pay for power imports,” Eng Chifamba said.

“Load-shedding is something we should avoid at all costs. It has a negative impact not only on our operations but also on the actual functioning of the economy. In times like this, customers earning forex should come and assist. In the process of helping us, they will be helping themselves because without reliable and secure (power) supply their business will be undermined.”

He added: “Previously we have had this kind of dispensation with customers and it’s the same model we are trying to replicate. We have been successful with platinum customers and we are also making a plea to others to come on board. If we lose these supplies the effects are calamitous. What is a power crisis might turn out to be a serious financial crisis.”

Since the beginning of the year, Zimbabwe’s power situation has significantly improved due to a number of initiatives put in place by Zesa Holdings, including imports. During the last quarter of last year, the power cuts had been so severe that many residents experienced up to 18-hour outages. The power cuts also affected businesses, particularly mining companies and the manufacturing sector.