As I’m sure we all understand by now, our electricity problems can only be solved by the private sector getting involved. Of course ZESA is still the most important entity in that sector but we simply cannot put all our eggs in that basket.
We have had difficulty attracting investment to the energy sector, but in recent years there seems to be signs of a change.
Mthuli Ncube explained why we are seeing increased interest in the sector. Clearly, the government has met the private sector halfway and provided reassurances on some of the issues that kept private investors away from energy.
Independent Power Producers (IPPs) in Zimbabwe requested three key measures to facilitate investment in the power sector:
- Economic tariffs: They asked for tariffs that ensure profitability. The government responded by raising the tariff to $0.16 per kilowatt hour, exceeding the profitability threshold of $0.10 per kilowatt hour.
- Government guarantees: They sought guarantees on power purchase agreements to ensure that if ZESA or ZETDC did not pay, the government would cover the payments. The Ministry of Finance implemented this guarantee.
- Access to foreign exchange: They requested arrangements to access foreign exchange to provide loans and pay dividends. The government’s implementation agreement was drawn up to resolve this, with ongoing fine-tuning.
These measures have attracted investor interest in solar, coal and transmission infrastructure projects. Mthuli says most of the independent power producers are investing in the solar sector.
He also says that since the tariffs were adjusted, there have been several inquiries from investors. This is hardly surprising as everyone understood that tariffs were too low to attract investment for years.
But, as I said earlier, we still need ZESA and it continues to face challenges, including customer defaults on payments, especially from large industrial users. Most individual users like you and I use prepaid meters, so we are no longer a problem.
To address this, ZESA is implementing net metering and prepayment programs to improve revenue collection from the large industrial users.
