Rumbidzayi Zinyuke
African companies are losing millions of dollars in lost sales as a result of the persistent power outages that have been affecting most countries on the continent, experts say. The electricity shortages, which have hit Southern Africa the hardest, has in turn diminished the competitiveness of businesses in the region.
As blackouts continue, many companies in the region and beyond have started to feel the impact and true cost that power blackouts have on their operations.
Speaking at a Zimtrade exporters’ conference in Harare recently, international trade expert Dr Jacky Charbonneau said African companies have had to substitute for lack of efficiencies and this has been costing them more.
“The cost of power outage as a percentage of lost sales ranges between 2-3 percent and 9-12 percent which can be quite massive. For those of you who invest in production, you have to invest in generators instead of new machinery or productive machinery. You now have a competitiveness handicap because you have to substitute for the deficiencies of infrastructure and you have to invest capital for those deficiencies,” he said.
He said companies that face such a situation do not have a minimum level of compliance to doing business and cannot remain competitive.
With nearly one billion people, Africa accounts for over a sixth of the world’s population, but generates only 4 percent of the global electricity.
Three quarters of that is used by South Africa, Egypt and a few other North African countries where only 30 percent of the population has access to power.
In some countries, power utilities have been accused of mismanagement and poor oversight while others have not maintained the power stations.
In the case of Zimbabwe, antiquated equipment at most of the country’s power stations have meant the Zimbabwe Electricity Supply Authority (ZESA) failed to meet the 2 200 MW of electricity needed to sustain the country, producing about 1200 MW instead. That figure has been further diminished by the low water levels in Kariba Dam that has forced Zimbabwe and Zambia to cut power generation by at almost 50 percent.
Electricity is one of the key enablers in the economy and its unavailability has had telling effects on all sectors of the economy.
The country’s industry has already been groaning under a series of challenges that included high cost of power, water and an expensive doing business environment which has reduced capacity utilisation for most companies to between 30 and 36 percent.
Production has declined significantly leaving local producers struggling to compete with the cheap commodities that are imported from other countries to cover the deficit.
The increased power outages are bound to put a death nail on these companies.
Confederation of Zimbabwe Industries president Busisa Moyo was recently quoted in the media saying load-shedding would push the few industries that are still to cut back on expansion projects that can create employment.
“We have not computed the cost of the power shortage, but we have seen that the load-shedding schedule has not spared industrial areas like Workington, Southerton and Msasa in Harare, Belmont, Donnington and Kelvin in Bulawayo and Bata in Gweru,” he said.
“The lack of assurance of power will also see more companies laying off workers as they cannot carry a fixed cost without production.”
And the Minister of Energy’s announcement last week that mining companies should cut energy use by 25 percent could have far reaching consequences that could results in another incidence of job losses.
The crisis has also affected the small-to-medium enterprises which account for over 70 percent of employment in Zimbabwe.
Analysts say this could seriously affect the country’s economic growth prospects, which have already been revised downwards to 1,5 percent from 3,1 percent.
The power crisis is not confined to Zimbabwe and Zambia only.
South Africa, which used to be one of the few countries on the continent where most people had reliable access to electricity, has been affected as well.
Experts say a lack of maintenance and investment pushed state-run power provider Eskom Holdings into a crisis where it struggles to meet demand.
These blackouts have threatened to drive Africa’s second-largest economy off a cliff, as mines and factories lose output and foreign investors pull back. As a result, the country’s economic growth has been projected to slow down to 1,5 percent.
The southern African region was, however, warned more than two decades ago that there would be a power deficit. It is the failure to plan ahead for the crisis by governments that has been blamed for the resulting impact.
Dr Charbonneau, however, said the Zimbabwean economy can recover despite the fundamental challenges.
“Zimbabwe is not fundamentally different to many other sub Saharan countries. There are economies who are in a similar geographic environment but are actually doing relatively well, you can take for instance Mauritius, Namibia and Zambia.
“We can argue that we have a dollarised economy, we are dependent on a few export destinations, we are an extraction export business, but still, the fundamentals are pretty much the same. You should talk about common issue like the financial support, infrastructure, governance issues and corruption,” he said.
He said Zimbabwe can leverage on its resources, both human and extractive to counter the effects of reduced competitiveness brought on by problems such as power shortages.
African companies are losing millions of dollars in lost sales as a result of the persistent power outages that have been affecting most countries on the continent, experts say. The electricity shortages, which have hit Southern Africa the hardest, has in turn diminished the competitiveness of businesses in the region.
As blackouts continue, many companies in the region and beyond have started to feel the impact and true cost that power blackouts have on their operations.
Speaking at a Zimtrade exporters’ conference in Harare recently, international trade expert Dr Jacky Charbonneau said African companies have had to substitute for lack of efficiencies and this has been costing them more.
“The cost of power outage as a percentage of lost sales ranges between 2-3 percent and 9-12 percent which can be quite massive. For those of you who invest in production, you have to invest in generators instead of new machinery or productive machinery. You now have a competitiveness handicap because you have to substitute for the deficiencies of infrastructure and you have to invest capital for those deficiencies,” he said.
He said companies that face such a situation do not have a minimum level of compliance to doing business and cannot remain competitive.
With nearly one billion people, Africa accounts for over a sixth of the world’s population, but generates only 4 percent of the global electricity.
Three quarters of that is used by South Africa, Egypt and a few other North African countries where only 30 percent of the population has access to power.
In some countries, power utilities have been accused of mismanagement and poor oversight while others have not maintained the power stations.
In the case of Zimbabwe, antiquated equipment at most of the country’s power stations have meant the Zimbabwe Electricity Supply Authority (ZESA) failed to meet the 2 200 MW of electricity needed to sustain the country, producing about 1200 MW instead. That figure has been further diminished by the low water levels in Kariba Dam that has forced Zimbabwe and Zambia to cut power generation by at almost 50 percent.
Electricity is one of the key enablers in the economy and its unavailability has had telling effects on all sectors of the economy.
The country’s industry has already been groaning under a series of challenges that included high cost of power, water and an expensive doing business environment which has reduced capacity utilisation for most companies to between 30 and 36 percent.
Production has declined significantly leaving local producers struggling to compete with the cheap commodities that are imported from other countries to cover the deficit.
The increased power outages are bound to put a death nail on these companies.
Confederation of Zimbabwe Industries president Busisa Moyo was recently quoted in the media saying load-shedding would push the few industries that are still to cut back on expansion projects that can create employment.
“We have not computed the cost of the power shortage, but we have seen that the load-shedding schedule has not spared industrial areas like Workington, Southerton and Msasa in Harare, Belmont, Donnington and Kelvin in Bulawayo and Bata in Gweru,” he said.
“The lack of assurance of power will also see more companies laying off workers as they cannot carry a fixed cost without production.”
And the Minister of Energy’s announcement last week that mining companies should cut energy use by 25 percent could have far reaching consequences that could results in another incidence of job losses.
The crisis has also affected the small-to-medium enterprises which account for over 70 percent of employment in Zimbabwe.
Analysts say this could seriously affect the country’s economic growth prospects, which have already been revised downwards to 1,5 percent from 3,1 percent.
The power crisis is not confined to Zimbabwe and Zambia only.
South Africa, which used to be one of the few countries on the continent where most people had reliable access to electricity, has been affected as well.
Experts say a lack of maintenance and investment pushed state-run power provider Eskom Holdings into a crisis where it struggles to meet demand.
These blackouts have threatened to drive Africa’s second-largest economy off a cliff, as mines and factories lose output and foreign investors pull back. As a result, the country’s economic growth has been projected to slow down to 1,5 percent.
The southern African region was, however, warned more than two decades ago that there would be a power deficit. It is the failure to plan ahead for the crisis by governments that has been blamed for the resulting impact.
Dr Charbonneau, however, said the Zimbabwean economy can recover despite the fundamental challenges.
“Zimbabwe is not fundamentally different to many other sub Saharan countries. There are economies who are in a similar geographic environment but are actually doing relatively well, you can take for instance Mauritius, Namibia and Zambia.
“We can argue that we have a dollarised economy, we are dependent on a few export destinations, we are an extraction export business, but still, the fundamentals are pretty much the same. You should talk about common issue like the financial support, infrastructure, governance issues and corruption,” he said.
He said Zimbabwe can leverage on its resources, both human and extractive to counter the effects of reduced competitiveness brought on by problems such as power shortages.
SOURCE: SOUTHERN AFRICAN NEWS
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