Mining industry's energy demand rises as power cuts bite

By Almot Maqolo
HARARE – Zimbabwe’s miming industry’s power requirements are expected to more than double in the next few years in line with the country’s ambitious plan to raise mining output and earn the country US$12 billion a year. The southern African nation is envisioning a US$12 billion mining industry by 2023. Of the US$12 billion, gold, platinum, and diamonds will contribute US$4 billion, US$3 billion and US$1 billion respectively. Chrome, iron ore and carbon steel will contribute US$1 billion while coal and hydrocarbons will contribute the same. Lithium will contribute $500 000, while other minerals will contribute $1.5 billion.

The southern African nation requires about 2200 MW of electricity to meet daily demand, but it is currently producing below capacity, resulting in power cuts. To augment local production, it imports power from mozambique and South Africa. The power situation remains precarious. However, more should be done so that power is allocated to the mining industry for the mining sector to ramp up production. The government has launched a roadmap with a target of US $12 billion in the mining sector by 2023, implying that the sector’s power requirements will more than double.

The Zimbabwe power situation has been in decline over the years, beleaguered by aging power plants, transmission losses and sub-economic tariffs relative to production costs, according to IH Securities. A Chinese Eximbank loan facility is being used to add an additional 600MW of generation capacity to Hwange, whilst US$110 million was acquired from the Indian Eximbank to upgrade power supply to Bulawayo. “In our view, the power situation in the short term is set to persist as upgrades are only expected to kick in from the second half of the year and functional capacity is set to be outpaced by growing demand,” the advisory firm stated. “This poses significant downside risk to growth prospects and ultimately increases the cost of doing business given oil price shocks in the international market.”

The set target of US$12 billion a year in potential revenue represents a 344% increase from the US$2.7 billion recorded in 2017. The sector contributes about 18% to GDP and provides essential raw materials for the manufacturing and agriculture sectors. Previously, mining companies were allowed to pay electricity bills in foreign currency in exchange for ring-fenced power from ZESA to avoid power cuts. Currently, the mining industry continues to face power outages. In modern economies, the mining and energy sectors have become increasingly
inseparable. However, the challenges that the energy sector is facing directly affect mining with a compounded ripple effect on the energy sector, which requires mining as a consumer and source of power. The competitiveness of doing business for the mining sector has been negatively affected by the high cost of doing business in the southern African nation, coupled by high cost drivers, poor infrastructure, unrealistic foreign currency controls accelerated by forex receipts retention, high tax burdens, and policy flip-flops.

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