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Zesa owed US$69 million – local authorities largest debtors

ZESA is owed US$69 million by its various customers with local authorities being the largest debtors.

ZESA Megawatt HQ in Harare
ZESA Megawatt HQ in Harare

Presenting a review and analysis of the Ministry of Energy and Power Development’s 2021 Budget Allocation, the Portfolio Committee on Energy and Power Development noted with concern that the amount owed to ZESA by various customers was ballooning.

This situation undermines the parastatal’s capacity to pay for emergency power supplies, undertake critical maintenance and develop new capacity for both generation and transmission infrastructure, according to the Committee.

The debts owed to ZESA have since reached US$70 million and are now a threat to electricity generation and provision. Currently ZESA is owed $3,2 billion (US$39 billion) by customers paying in local currency and US$30 million by those billed in foreign currency.

The largest debtors include local authorities ($1 billion), parastatals ($189 million) and Government ($400 million).

The failure to pay by Government and local authorities have negative effects on the electricity generation by the company, according to the Committee’s submissions to Parliament.

“The committee therefore recommends that in 2021, Government should take a leadership role by paying up its electricity bills arrears.”

ZESA itself has a debt overhang of approximately US$90, which puts it into an unhealthy relationship with its suppliers. According to the committee, ZESA’s debt accrued due to delays in effecting tariff changes in line with macroeconomic developments in the country that were characterised by rampant inflation and a fast-depreciating exchange rate.

While ZESA has now been allowed to charge tariffs that are seen as in line with economic development, the firm still argues the tariff is still low.

The power utility indicated to the Committee that an average tariff of US10 cents would enable the company to provide electricity whilst at the same time servicing its debt.

The current tariff stands at US7,73 cents. The debt situation comes amid concern that Treasury has, for the past years, failed to disburse the total budgets allocated to the Ministry.

Such a trend, according to the committee, implies that Ministry’s activities also suffer from the failure by Treasury to timeously release funds allocated in the budgets.

Despite being allocated a revised total budget of $525,8 million in the 2020 budget, Ministry of Energy and Power Development’s disbursements from Treasury in 2020 amounted to $80,65 million, which represents 15 percent of the ministry’s 2020 budget allocations.

According to the committee’s submissions, this resulted in failure to carry out monitoring and supervision of projects under the Ministry’s purview. The non-disbursement of funds also resulted in the stagnation of most projects under the Ministry.

For 2021, the Energy Ministry had submitted bids amounting to $3,43 billion but Treasury allocated $1,641 billion. The amount allocated represents 48 percent of the Ministry’s funding requirements.

Treasury allocated $900 million for a loan facility to ZESA to cover local taxes for the expansion and rehabilitation works at Hwange Units 7 and 8. The committee noted with concern that the amount allocated is lower by $550 million from the $1,45 billion that the Ministry had requested. The underfunding will delay the completion of work that is already behind schedule. The Chronicle.