Vusumuzi Dube
Economy Uncensored with Tapiwanashe Mangwiro
In an economy plagued by recurring power shortages, the numbers of amounts owed to the Zimbabwe Electricity Supply Authority tell a story of a crisis that could have been averted or at least mitigated if everyone played their part.
ZESA finds itself teetering on the edge, burdened by an astounding ZiG5,66 billion in unpaid arrears. The lion’s share of this debt which is over 50 percent is owed by the industrial sector. This situation highlights a stark contradiction: industries that rely heavily on electricity for their operations are the very entities starving the power utility of the resources it needs to function effectively.
The industrial sector must recognise that it cannot have it both ways and the continued non-payment of arrears is not just an issue for ZESA; it has far-reaching consequences for the entire economy, the social environment and even the industries themselves.
The Economic ripple effect
ZESA’s inability to collect what is owed to it by industry and other sectors is more than just a cash flow problem but it is a full-blown economic crisis in the making. Power shortages have already led to disruptions in production, with factories forced to scale back or shut down operations.
This has a cascading effect on the economy: lower production volumes lead to reduced exports, a shrinking tax base, and ultimately, less foreign currency inflows. In a country where every dollar counts, this loss is deeply felt across the economy.
The failure of the industrial sector to pay up is akin to shooting oneself in the foot. Industries need a stable and reliable power supply to operate efficiently, yet by withholding payments, they are directly contributing to the very power shortages they lament.
Results of such a vicious cycle: power cuts lead to reduced productivity, which in turn leads to lower revenue, making it even harder for these industries to settle their arrears. The industrial sector must break this cycle by settling its debts, thereby enabling ZESA to improve its infrastructure and ensure a more reliable supply of electricity.
Social and environmental impact
The consequences of ZESA’s financial struggles extend far beyond the confines of the industrial sector. The social implications are dire.
Frequent power cuts disrupt daily life for millions of Zimbabweans, affecting everything from healthcare services to education. Hospitals are forced to rely on expensive and polluting diesel generators, putting patients’ lives at risk, while schools struggle to provide a conducive learning environment in the absence of consistent power.
The quality of life for ordinary citizens is eroded as they grapple with the uncertainty of when the lights will go out next.
Environmental concerns are also at the forefront of this issue. As ZESA struggles to maintain its aging infrastructure, the utility is forced to rely more on coal-fired power plants, which contribute significantly to air pollution and greenhouse gas emissions.
The longer industries and other sectors delay payment, the more ZESA’s ability to invest in cleaner, renewable energy sources is compromised. This, in turn, exacerbates the country’s environmental footprint, undermining efforts to combat climate change.
The path to recovery
ZESA’s situation is dire, but it is not beyond repair. The first step in addressing this crisis is for the utility to adopt a more aggressive approach to debt collection. Industries and other sectors that are in arrears must be held accountable.
ZESA could implement stricter penalties for non-payment, including disconnections and legal action. While these measures may seem harsh, they are necessary to protect the long-term viability of the utility and, by extension, the economy.
In addition to stricter penalties, ZESA should explore innovative financing options to bridge the gap between its current financial state and the investment needed for infrastructure development. One possibility is to issue bonds or seek partnerships with international investors, who may be willing to inject capital into the utility in exchange for a stake in future profits.
Another avenue is to leverage public-private partnerships, where industries that are major power consumers contribute directly to the expansion and modernisation of the grid in exchange for guaranteed power supply agreements.
Moreover, the Government has a crucial role to play in this recovery process. As a significant debtor itself, owing ZiG 303,27 million, the Government must lead by example by settling its arrears promptly.
Beyond that, it can introduce policy measures that encourage timely payments across all sectors. For instance, offering tax incentives for industries that pay their electricity bills on time could provide the necessary nudge for compliance.
The Government could also work with ZESA to create a more transparent and predictable pricing mechanism for electricity, reducing disputes over billing that often lead to delays in payment.
The consequences of inaction
If the current situation persists, the consequences could be catastrophic as ZESA’s inability to service its debts and invest in infrastructure will lead to further deterioration in the quality and reliability of power supply.
This will drive even more industries to close shop or relocate to countries with more stable power supplies, leading to job losses and further economic decline. The social fabric of the nation will also continue to fray as power shortages exacerbate poverty, inequality, and environmental degradation.
The industrial sector, in particular, must realise that it stands to lose the most if ZESA collapses. The cost of inaction is far greater than the price of settling outstanding debts. It is time for industry leaders to step up and pay what they owe, not just for the sake of their own businesses, but for the future of the entire nation.
Conclusion
Industry cannot have it both ways. The current state of affairs, where the sector demands a reliable power supply while withholding the funds necessary to ensure it, is unsustainable. The time has come for all debtors to pay up.
ZESA needs these funds to revitalize its infrastructure, improve service delivery, and secure the country’s energy future. The alternative is a continued downward spiral that will harm not just the utility, but the economy, society, and environment.
The choice is clear; pay up or face the consequences.
Tapiwanashe Mangwiro is a resident economist with the Business Weekly and writes this in his own capacity. @willoe_tee on twitter and Tapiwanashe Willoe Mangwiro on LinkedIn
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