HARARE – Prolonged blackouts are wiping at least US$4 billion out of Zimbabwe’s key mining industry annually, adding misery to a country already battling extensive write-downs sparked by the return of devasting fuel shortages, an analysis of Zimbabwe mining sector statistics by ENN has revealed.
Following a decade of dollarisation that briefly calmed its frail economy and propelled jittery markets back to stability, Zimbabwe’s frail industries are on the edge again.
So dire has the situation been as fears of a relapse into turbulences experienced in 2008 mount, Zimbabwe industries last week warned that in the absence of concrete action, scores of firms could collapse within 30 days.
Today, ENN can exclusively reveal that power blackouts could be afflicting the economy at the same measure as fuel and foreign currency shortages.
And unless President Emmerson Mnangagwa’s government immediately springs into action, the industry, which generates about US$3 billion per annum, could be headed for a meltdown.
Gloom prospects have been bolstered by a wave of fuel shortages. Mines rely on diesel powered generators to run operations during power cuts.
This could ignite fresh waves of de-industrialisation across sectors, considering the clout that the mining sector commands in an economy in which it generates over 50 percent of export revenues and about 40 percent to GDP.
In the State of the Mining Industry 2018 Report released in December, the Chamber of Mines of Zimbabwe (CoMZ) reveals graphic details of how electricity shortages are affecting operations.
“All respondents indicated that power outages were negatively impacting on their operations resulting in output losses,” the CoMZ said.
“In times of power outages, respondents indicated that they would use diesel powered generators which are expensive,” notes the CoMZ.
While the CoMZ does not provide overall figures, ENN researchers used its global energy data and a range of previous reports on Zimbabwe to arrive at a figure of at least $4 billion.
The CoMZ says 60 percent of mines were reporting up to $1 million in yearly losses to power, which adds to $480 million in economic losses, based on the CoMZ’s register of about 800 mines.
This adds to about 30 percent of survey respondents who said they were losing between $1 million and $3 million per annum to power shortages, which translates to about $720 million.
Eighty of respondents said power cuts were costing their companies $3 million annually, which adds up to $240 million, according to calculations by ENN.
Cumulatively, the mining industry could directly lose a combined $1,4 billion to electricity shortages.
A further $3 billion could be lost in downstream industries. Calculations by ENN indicate that total annual losses suffered by the mining sector, together with downstream industries could reach at least $4 billion after factoring in losses in a range of sectors that survived around it.
ENN researchers arrived at this figure based on reports that every $1 generated by Zimbabwe’s mines creates $3 in a range of feeder industries such as explosives traders.
Each dollar lost by the industry leads to a corresponding loss of $3 downstream. State run power monopoly, ZESA Holdings has had to resort to power imports to bridge a deficit of at least half of the 2,2 million Mega Watts per hour (MWh) required to fire Zimbabwe.
Institute of Mining Research (IMR) chairman, Lyman Mlambo, says headwinds remained endemic.
IMR is a specialist institute based at the University of Zimbabwe. “There were significant losses due to power blackouts,” Mlambo said at the presentation of the survey.
“There were significant losses due to power blackouts” Mlambo
“It is a serious issue, the cost of power needs to be addressed,” warned Mlambo.All mining executives who responded to the
CoMZ survey warned against the prolonged power problems to Zimbabwe’s economy.
Troubles rocking the mining industry are compounded by high taxes, old infrastructure, which have all undermined its potential to reach full potential to generate almost US$20 billion yearly.
These estimates are contained in the CoMZ’s reports.
Desperate to avert an industrial and social crisis, Mnangagwa resumed his hyped reengagement offensive last week with flights into eastern Europe, possibly to canvas for bail outs.
It is not clear if eastern Europe will be ready to listen to his story after a fruitless trip to China last year.
But while he is out persuading less influential economies to turn their focus to a country owing international and domestic lenders over $16 billion, Harare is on fire.
The raging infernos are not only stemming out of the huge interests demanded by banks on long running loans.
They are stemming out of the return to foreign currency pricing of goods and services by frustrated businesses.
This is happening in a market where the last remaining workers earn salaries through an electronic platform called the Real Time Gross Transfer System, which is just the electronic transfer of values without a backing currency.
Petrol service stations last week began mutating towards this pricing regime, sending shocks among consumers in this southern African country of 16 million people.
