In Zimbabwe, electricity is only lasting up to 10 hours daily in some areas and threatening mining output in one of the world’s biggest platinum and gold producers.
The sector, which generated most of Zimbabwe’s $4.8 billion of export earnings last year, is crucial to President Emmerson Mnangagwa’s pledge to revive an economy ravaged by drought and soaring inflation.
Three years ago, power cuts that extended up to 18 hours hit production at gold mines and producers subsequently agreed to pay a higher tariff to guarantee supplies.
The mines have so far been saved from the rolling cuts, which the state-owned power firm said would be open-ended, but there is no guarantee they will continue receiving electricity if the blackouts are prolonged.
Here is a look at why Zimbabwe is facing electricity shortages, what it means for economic revival efforts and what the government is doing to tackle the problem.
How did Zimbabwe get here?
For the past 20 years, Zimbabwe has struggled to generate enough electricity to meet demand, and has had to turn to countries like Democratic Republic of Congo, Namibia, Mozambique, South Africa and Zambia to top up supplies.
During the 2000-2008 recession when the southern African country was in the grip of a dollar crunch and hyperinflation, it became harder for it to pay for the imports, leading to most of these countries to demand cash upfront.
Zimbabwe has one hydro power plant and four coal-fired generators with a total combined capacity of 2,240 MW, just enough to meet the country’s demand.
But the Kariba hydro plant, which commissioned another 300 MW last year, is only producing a third of its design output because of low dam water levels due to the drought.
Hwange, the biggest coal-fired plant was built in the 1980s and work only started last year to add another 600 MW begin after years of false starts during Robert Mugabe’s 37-year rule.
The new generators will only come on stream in three years and even then, this does not guarantee power because the major coal supplier, Hwange Colliery, is struggling to stay afloat.
Three other smaller coal-fired plants with capacity to add 270 MW to the national grid are down after negotiations to secure funding from India’s Export and Import Bank to repair and upgrade the generators floundered.
In the last decade, Zimbabwe signed at least six power generation agreements, including solar power that would have added more than 3,000 MW in new electricity to the grid, but the projects failed to take off due to bureaucracy and lack of funding because of the country’s high political risk profile.
What is at stake?
Zimbabwe can ill afford any production interruptions in the mining sector, the mainstay of the economy.
Officially, the country is projected to register anemic economic growth this year after drought devastated agricultural output and a cyclone ripped through parts of eastern Zimbabwe.
A drop in mining production could tip the economy into recession, economic analysts say.
Gold is the single largest mineral export and the government is on an aggressive drive to raise output from the record 996,373 ounces last year, but without power, these efforts will be in vain.
Producers of platinum import their own power, which secures production, but gold mines rely on the unstable national grid. Although they have been spared from the power cuts so far, they are not assured this will continue if the blackouts continue.
Zimbabwe is the world’s third-largest platinum producer after South Africa and Russia.
The country’s manufacturing sector, for years struggling to compete with imports mostly from South Africa and China, also needs electricity to protect jobs in a country where formal employment is only 20 percent.
“The government cannot afford to switch off the mines, it will be like biting the hand that feeds you,” said John Robertson, a Harare-based economic analyst.
He said the power cuts would also hit farmers, particularly those who are in the process of planting irrigated winter wheat, the country’s second main staple crop after maize.
What is the government doing?
The government says it has approached Mozambique to negotiate a power purchase agreement. But given a severe shortage of dollars, Zimbabwe may not have money to secure adequate supplies from its neighbour.
In the long term, Zimbabwe will consider building a power station near Mozambique’s Hydro Cahora Bassa dam, Justice Minister Ziyambi Ziyambi told parliament on Wednesday. Mnangagwa this week replaced the energy and power development minister after a public outcry over the cuts.
The national energy regulator has been licencing a raft of solar power projects, most of which are still to take off. In any case, analysts say the projects are off grid and too small, averaging 5 MW and will only supply electricity to local communities in the countryside.
Zimbabwe announces end to foreign currency use amidst spiraling inflation
President Emmerson Mnangagwa has promised to introduce a proper national currency soon
Zimbabwe announced on Monday that it would abandon the use of foreign currencies which replaced the local dollar that was swiped out by hyperinflation ten years ago.
The country is facing another bout of sharply rising prices, with official inflation now at nearly 100 per cent — the highest since the hyperinflation era.
Zimbabwe’s central bank said in a statement that official legal tender would be only the two local currencies — bond notes and “RTGS” — that were introduced as US dollar banknotes dried up.
The US dollar, South African rand and other foreign currencies “shall no longer be legal tender alongside the Zimbabwe dollar in any transactions in Zimbabwe,” the bank said.
“Bond notes and RTGS dollars are at par with the Zimbabwe dollar.”
Bond notes were introduced in 2014, while electronic RTGS (Real Time Gross Settlement) dollars came earlier this year.
President Emmerson Mnangagwa has promised to introduce a proper national currency soon.
Bond notes and RTGS dollars have in theory been worth the same as US dollars, but have fallen sharply in value.
Zimbabwe’s economy has been in ruins since hyperinflation peaked at 500 billion per cent in 2009 under president Robert Mugabe.
Mnangagwa’s efforts to attract investment and create jobs have struggled since he came to power in 2017.
Morocco’s Sole oil refinery struggles to stay afloat
A self-declared “national front” is leading the charge to salvage refining company SAMIR
Three years after it was liquidated for racking up billions of euros worth of debt, Morocco’s sole oil refinery and the one-time economic flagship is struggling to attract a buyer and survive. A self-declared “national front” – comprising employees, economists and union leaders – is leading the charge to salvage refining company SAMIR, while a trade court desperately seeks a new owner.
They face a tough battle, including a court deadline of July 18 to seal the refinery’s fate. The firm was liquidated in 2016 after it was unable to honour some four billion euros ($4.5 billion at current prices) in borrowing. The refinery was set up in 1959 by the Moroccan government and sold in 1997 to the Corral group, a Saudi-Swedish enterprise that holds a majority stake of more than 67 per cent.
Work at the refinery, which had a capacity of more than 150,000 barrels a day, had already wound down a year before it was dissolved. But nearly 800 employees remain on the payroll, albeit on slashed salaries scratched together from company coffers and creditors.
The workers’ fate now hangs in the balance, according to staff representative Houcine El Yamani, who has spearheaded efforts by the “national front” to salvage the facility. “We have made tremendous efforts” to pressure the state into reviving SAMIR since work stopped in 2015 at the plant in Mohammedia, between Rabat and the economic hub Casablanca, El Yamani said.
Such efforts include sit-ins and press conferences. “We still have hope of finding a solution,” he added. A “national front” report submitted last year to Moroccan authorities denounced the 1997 privatisation of the refinery as a “big sham” and the sale to Corral as “totally lacking in transparency”.
“The Corral group did not respect any of the terms of the contract (including pledges to invest funds to develop the refinery), dragging the sole national refinery into an infernal spiral,” said the report. The drop in global oil prices in 2014 affected SAMIR, but the “national front” says bad management was the main factor behind the firm’s woes, as debts mounted and attempts to satisfy creditors failed.
Sold to scrap
After its liquidation in March 2016 by a Casablanca court, a committee of trustees was set up to find a buyer and safeguard jobs for employees. “Around 30 international groups showed an interest,” but nothing materialised, El Yamani said.
The “national front” also said the government could have been more pro-active. “In the absence of any government action, the refinery’s assets risk being sold to scrap by the kilogramme,” the coalition of employees, economists and union leaders said in its report.
Minister of Energy and Mines, Aziz Rebbah, dismissed claims that the government has no interest in salvaging the oil refinery. “We have nothing against it,” he said. “If a buyer comes forth we will examine the proposal,” he added. Morocco is totally dependent on oil imports and the winding up of SAMIR’s operations has left the North African country more reliant than ever on imports of refined oil products.
A report earlier this year by the International Energy Agency noted that “the closure of the country’s only refinery… has clear implications for the security of oil supply” in Morocco. The court that liquidated SAMIR three years ago has extended a deadline to keep the refinery open a dozen times.
The last extension expires on July 18, when SAMIR will know if it has a buyer or if it will be sold “in bits and pieces”, according to Moroccan media reports. As the battle for SAMIR’s survival plays out, another legal fight is underway between the refinery’s main shareholder, Saudi-Ethiopian billionaire Mohammed Al Amoudi, and the government.
Al Amoudi – who was arrested in Saudi Arabia in 2017 as part of a vast anti-corruption campaign – is demanding $1.5 billion in compensation from Morocco over SAMIR’s demise, according to Moroccan news website Media24.
National Oil Company warns that any attempt to disrupt the sector would escalate unrest
“Any deliberate disruption of oil sector operations will severely impact national revenue streams, potentially render NOC in contravention of contractual obligations
Libya’s National Oil Company has warned that any bid to tamper with the sector could escalate unrest in the country after the parliamentary speaker called for a halt to production. In a statement issued late Saturday, NOC said it “is concerned by recent calls for the shutdown of national oil production”.
“Any deliberate disruption of oil sector operations will severely impact national revenue streams, potentially render NOC in contravention of contractual obligations, and create further division in the country.” Libya has been in conflict since the 2011 uprising that ousted and killed dictator Moamer Kadhafi, with rival administrations vying for power and to control its oil wealth.
The conflict has been exacerbated since April when commander Khalifa Haftar, who is based in the east of the country where most oil fields are located, launched an offensive against the capital Tripoli. The city is the seat of the internationally recognised Government of National Accord (GNA), while the elected parliament which supports Haftar is based in eastern Libya.
Last week parliamentary speaker Aguila Saleh Issa said oil production must cease, accusing the GNA of using oil revenues to finance the militias fighting Haftar, in an interview with an Egyptian news channel.
The country’s oil company, which is headquartered in Tripoli, has repeatedly insisted on its neutral status and refused to be drawn into the conflict. “This crucial source of income to the state, vital to all Libyans, must remain de-politicised and uninterrupted,” NOC said on Saturday.
But it also called for “economic transparency – including the equitable distribution of oil revenues nationally – to be embraced by all parties as an integral element of Libya’s future stability, and any lasting political settlement”. Libya’s oil revenues are managed by the country’s central bank, which is also based in Tripoli.
Both Haftar and the eastern parliament have repeatedly said that oil revenues are not evenly distributed and accuse the GNA of using the funds to finance its militias. Last month UN envoy Ghassan Salame said that Libya – which produces more than a million barrels of oil a day – was “committing suicide” and plundering its oil wealth to pay for the war.
On Saturday he met Haftar to discuss the Tripoli offensive and ways to “accelerate the transition towards reaching a political solution” in the country, the United Nations said.
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