‘Increased power cuts to affect economic growth’

via ‘Increased power cuts to affect economic growth’ – DailyNews Live 18 November 2015

HARARE – Zambezi River Authority (ZRA)’s intention to allocate reduced water supply to Zimbabwe due to declining water-levels in Kariba Dam will significantly affect the country’s future economic growth prospects, economic analysts have warned.

Zimbabwe’s economy is predicted to grow by 2,7 percent next year by the International Monetary Fund up from 1,5 percent this year, but experts say with increased power cuts the country would be lucky to record any growth in 2016.

“Finance minister Patrick Chinamasa must set very conservative and modest projections in his national budget to be presented next week Thursday,” economist Christopher Mugaga said.

“The electricity situation is nothing short of a crisis that is going to affect industry very much, especially manufacturing. Taking this into account Chinamasa’s budget should be smaller than the one he presented last year,” added Mugaga who is also the Zimbabwe National Chamber of Commerce chief executive.

Mugaga noted that economic projections should be strictly numbered as “growth cannot be anything above one percent as the country’s biggest economic contributor, mining, is power intensive”.

This comes after ZRA — jointly-owned by Zimbabwe and Zambia with the mandate to run the Kariba Dam — announced on Sunday that it was moving to further reduce water allocation to the two countries from the current 40,5 billion to 20 billion cubic metres to be shared equally between the two countries.

The joint venture firm said receding lake levels recorded at Kariba during the 2014/15 rainy season resulted from low rain inflows and increased generation activity by the two country’s power generation utilities, Zesco Limited and the Zimbabwe Power Company, failure to manage the remaining water properly would plunge the two countries into darkness.

Electricity shortages in the two southern African countries worsened in September due to low water levels in the dam — a situation that has threatened output, jobs and economic growth.

Kariba’s low water levels have compelled both countries to cut electricity generation and have led to rotating power cuts that last as long as 14 hours a day.

Zambia’s energy shortage has also led to mine suspensions in Africa’s second-largest producer of copper and thousands of planned job cuts and a hundred percent power tariff hike.

It’s also contributed to this year’s 47 percent depreciation of the kwacha, the world’s worst-performing currency, against the dollar.

In Zimbabwe, the power cuts are having their toll on the ailing local industry, which has been operating at between 30 and 35 percent of their installed capacity.

Mugaga said Zimbabwe’s manufacturing sector capacity utilisation — which slumped further to 34,3 percent this year from 36,5 percent registered in 2014 — was also expected to tank even lower on the back of the anticipated power shortages.

“It is not a promising year, which is especially sad because in mining metal prices are expected to recover in 2016, but we will not feel this as miners are now being forced to import own power,” he said.

Presently, the local equities market, Zimbabwe Stock Exchange — a leading barometer of the state of the economy — has been on a relentless bearish run for eight consecutive months to October, reflecting the country’s moribund economy.