The country is looking to have ventures with neighbouring countries like Mozambique to ensure all areas of Zimbabwe have access to affordable energy provisions
What can the energy sector do to boost the economy?
The provision of modern energy is paramount so we can lead the transformation of the economy and country. A lot of people think that it must be a result of demand. We also need to make sure that there is general access to electricity by all our people. Despite the situation, electricity penetration in terms of the population is one of the highest in Africa. We are actually spearheading it. This year alone we are allocating $40 million towards extending the grid, and next year it will be more and more, until we have covered the rural areas. I think that in the next ten years, we will have really transformed it. We will probably be achieving upwards of 80 to 90% penetration over the next ten years.
We are also looking at underpinning that with the legal framework, to make sure that we get more energy generation capacity. We have got the best laws already. We allow for independent power producers to come in and it is then transported via a government vehicle, and they can distribute it to wherever they want. So you can also have independent power consumers. The government is just there as the skeleton, but otherwise the major role that the government will play is in the provision of transmission facilities. We will guarantee equal access to everyone. We have also got an Independent Energy Regulatory Authority that will look at all the tariffs. The Act is clearly trying to balance between the requirements of the investors, government and the consumers.
In terms of the business, we are one of the countries that have recognised that the tariff must be based on cost recovery. There is no subsidy. The business angle of it needs to be recognised. Therefore, despite what has happened to our country, without any foreign investment coming in, we have actually been able to put the energy sector back on its feet to a point where we can say that the energy sector is already robust. We have looked at the business angle as well, and run it as a profit-making business. So any investor who comes in and runs their business properly will be able to make a profit.
Can you keep your prices competitive?
We do not have to keep them competitive with neighbouring countries; it is neither here nor there. We have got to look at ourselves first. We want to be the leaders. You want to be able to chart the direction and say that this is where we are going. We have got a very long-term perspective. When you look at our people in the rural areas, women spend more time looking for firewood. Therefore girls cannot go to school because they are doing all these chores, and you have to take this into consideration. When you look at our costs versus Europe for instance, you will find that we are still not as high as Europe, because our level is a little bit down. But we are actually have a cash disadvantage here. When we buy the capital equipment, we get the worst terms, whereas Europe get the best terms.
Subsidies are not the right thing, and they ensure that the sector never develops. We are putting tariffs on a platform where this sector will develop.
Regarding ZESA, to what extent will there be an unbundling of activity?
ZESA has already been unbundled. We will actually be removing ZESA Holdings, which is the one thing that makes people think that ZESA is not unbundled. We are going to formally remove it by year end so that we have ZPC standing on its own. We are renaming the transmission the National Grid Services Company, the distribution company on its own, and the telecoms company on its own. We have already decided that, so it is simply a question of implementing. For me it is purely an accounting consideration; otherwise everything else is done. You have the generating company (ZPC) which has a power purchase agreement with the transmission and distribution company at arm’s length, so it is already operational.
What impact will this restructuring have on the consumer?
A zero impact, because for independent power producers (IPPs) we are already looking after these as separate companies. We have issued about 15 licenses. I think there are about five big licenses which we have already issued. We hope that one, two or three of them will come to fruition. I am told that one of them is very close to financial closure, so we could start construction next year. So the independent power producers (IPPs) are coming. We already have about four small IPPs that are already producing. IPPs are no longer a theory now; they are a fact.
Your ministry is the foundation of the development of NTPs. This will not be achieved without the proper implementation of PPPs. What is your ministry doing in order to promote PPPs?
We have already started advertising a BOT (Build-Operate-Transfer) arrangement for a hydro scheme. We have done it with Zambia and we are now looking for the private sector to come in and partner. It is already happening in that sense. We have already put out an internal tender for coal bed methane (CBM) exploration and quantification, so that we can then work with the private sector to build a power station. If there is any surplus gas, we will then go for other industries like fertiliser, manufacturing and so on. This advert is already out. We are negotiating with some international companies about putting out other generation capacity on the basis of agreements between themselves and government and where they will come in, construct and manage. It will not just be about transferring ownership. These things are already taking place. We are now in the full implementation phase.
Which parts of the energy mix are attracting foreign investors the most?
In every sector. You will find it is hydro in Batoka. We are talking about coal, because we have plenty of it. We are talking about gas now as well, because we think we have got it, but we will soon find out. We have also been talking to Mozambique about importing their own gas, should ours not be sufficient. We are running a two-track process. If our gas is sufficient, then we will stop the other track. If ours is not, then we will continue with gas from Mozambique. We are working on a regional project to take the gas from Mozambique via Malawi to here by pipeline. We are talking about cooperating not just with the private sector, but with other governments as well, because we know this is required.
Could you tell us a little bit more about the inner workings of the committee and its impact so far on improving relationships?
We have tried to stop Zimbabwe from being a pariah state to one that will be able to have relations on an equal footing, and where we will have dialogue with everyone. They can then tell us what they do not like about us and what we need to change, so that we do not feel as if Zimbabwe is not being treated equally. We have been engaging those countries. One part of the government has been largely affected by the travel bans, and another part which is not. Some call them sanctions, and others call them measures. We do not feel this is necessary, and you can achieve the same objectives in different ways. It is important that whatever measures have been put in place, you can show that they have achieved the desired effect. Continuing with them, particularly for us in Zimbabwe is no longer progressive, they are beginning to be used as a political tool rather than bringing in the kinds of measures originally intended. It is very easy to blame everything on sanctions, like if sanctions were not there, the rain would come.
We have said that this is not helping us. They should be removed so that there is no excuse. When we look at development assistance, in the power sector the Zim Fund was set up two years ago, but there has not been a single disbursement. If the funding went straight to the government, we would have used it and our power sector would be somewhere else. So we have got examples everywhere of what people are trying to do and what they think they are going to achieve. These sanctions were put into place in 2002, and they did not stop us being beaten in 2007 and the 2008 election violence. We have got a saying that if you continue doing the same thing in the same way, but expect a different result, it shows that you are probably fit for the mental institution! We should at least try something else.
I think that our engagement with the EU in particular has produced some very good results. At a country level, there is now normalisation. They now have a few people on our travel bans. The country can now access funding on an open and equal footing. But they could have done better.
What key message would you like to send to leaders in the US?
We understand what our situation is, so they must be able to realise that we have the best interests of our people in the country at heart and we are probably seeing something that they are not yet seeing. Therefore they need to listen to us and have dialogue with us, to see where we can make some changes. Certainly remaining rigid does not help anybody. It does not help them either. We now have China coming in and sometimes getting ridiculously favourable terms that they would otherwise not get if there was a level playing field.
10 Fintech 101
When being part of a generation on which the flag of entrepreneurship seems to be constantly waving in the sea of young professionals looking to succeed in the business world, more often than not, we tend to drown in the... Read More