Eskom threatens to cut power next week

By Phillimon Mhlanga

South Africa’s power utility Eskom has threatened to cut electricity supplies to Zimbabwe unless the country, battling a foreign currency crunch, honours its debt obligations before the end of next week, sources disclosed this week.

Zimbabwe’s economy, officially projected to expand by 3,7 percent this year, has been hit by foreign currency shortages that have impacted key productive sectors.

A power deficit would compound the situation.

State-owned power utility, ZESA, has failed to stick to a payment plan agreed with Eskom in July this year. The country owes the South African power utility close to $100 million.

ZESA had agreed to pay about $22 million a month starting in July, but defaulted on the first instalment due to a shortage of foreign currency. Zimbabwe is now $44 million in debt arrears to Eskom, according to information obtained by The Financial Gazette.

Well-placed sources this week said the South African power utility has threatened to cut electricity supplies to Zimbabwe at the end of this month if the country fails to honour its obligations.

Zimbabwe, which is not generating enough electricity to meet domestic demand, imports up to 300 megawatts (MW) from South Africa. The country also imports up to 50MW from Hydro Cahora Bassa of Mozambique to augment supplies from low local generation.

“The foreign currency shortages could plunge the country into darkness because ZESA has defaulted even on its very first instalment to Eskom. Now, we are in a crisis because we have been given up to the end of this month to pay off the debt arrears. Failure to pay monthly instalments of about $22 million, Eskom has threatened to cut supplies to the country,” said a well placed source at ZESA.

ZESA chief executive officer, Josh Chifamba, acknowledged that the power utility was having financial difficulties but refused to comment on the issue. Electricity supplies are part of critical pillars of the government’s economic revival strategy enunciated through the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-Asset), which envisages increased access to electricity by domestic consumers, both within urban set ups and rural communities.

The electricity situation has serious repercussions on the recovery of productive sectors of the economy such as manufacturing, mining and agriculture, which government wants to drive the country’s economic recovery.

Zimbabwe is facing serious foreign currency shortages, which have partnered with cash shortages to disrupt major economic activities. The foreign currency crisis has resulted in companies failing to make foreign payments, particularly for raw materials and other critical inputs.

The Reserve Bank of Zimbabwe (RBZ) last year put in place a foreign currency allocation list, which prioritised the productive sectors as well as fuel and electricity imports. 

However, it would appear this has failed to salvage a desperate situation, with a backlog of foreign payments now at nearly $600 million.

Efforts to get a comment from RBZ governor, John Mangudya, were fruitless. His mobile phone continuously went unanswered. He also did not respond to a message from this newspaper.

Mangudya has lined up a $600 million facility with the African Export Import Bank (Afreximbank) to help ease the foreign payments backlog and stabilise critical imports such as power and fuel.

Energy and Power Development Minister, Samuel Undenge, and permanent secretary, Partson Mbiriri, were also not available for comment.

Eskom’s spokesperson, Khulu Phasiwe, could also not be reached for comment.

Officials from ZESA, the central bank and the Ministry of Energy and Power Development, have. travelled to South Africa for a meeting with Eskom to agree on the current payment plan. The Financial Gazette