This briefing note is the result of a collaborative research process with the Zimbabwean private sector, government representatives, industry organizations and experts, drawing on best practice and senior-level insights to identify policy options for long-term economic revival and expansion in Zimbabwe, and pathways for inclusive development.
Underpinning Economic Growth to 2030: Water, Energy and Rail Infrastructure
Looking beyond the immediate imperative to stabilize the economy and ensure provision of essential goods and services, there are three key areas of Zimbabwe’s basic infrastructure that the government will need to address to ensure sustainable economic growth. These are water, electricity generation and transport (particularly rail). All these sectors are currently in crisis.
Water
Across Zimbabwe, few critical reservoirs are at more than 50 per cent capacity; Kariba Dam is down to 30 per cent capacity.33 The Zambezi river is at its lowest level in 50 years. Many boreholes are no longer pumping because the water table is too low. Water rationing was introduced in Harare and Bulawayo in July 2019, restricting residents’ access to municipal tap water just once a week. This has exacerbated an already severe public health challenge, with one Harare council official admitting: ‘The situation is bad, period!’34 Estimates for the additional level of investment required are as high as US $365 million per year for water, and US $336 million for sanitation.35
As well as having a severe effect on households, the shortage of water has had a negative economic impact across all sectors, particularly tourism, mining and agriculture (particularly agricultural products with multi-year production cycles, such as sugar cane or coffee). A lack of investment in dam and irrigation infrastructure has meant lower output of irrigated crops.
Power generation
Successive droughts have exposed the fragility of Zimbabwe’s electricity sector and the risk of dependence on a few large-scale centres of generation. The low level of Kariba Dam and other hydro plants, and the increasingly faulty machinery at Kariba and at the Hwange Colliery thermal power plant have cut Zimbabwe’s energy output to less than a third of its 1,800 MW capacity: output in August 2019 was below 600 MW.36 The Kariba South Extension, completed in 2018, has added another 350 MW in generating capacity to the grid, but this is the first investment in power generation made in Zimbabwe in the last 30 years. Zambia and Zimbabwe recently agreed to jointly develop the Batoka Gorge hydropower project on the Zambezi, 54 km downstream from Victoria Falls, with eventual generating capacity of some 1,600 MW, but construction is expected to take more than a decade.37
Electric power is a key input into mining, agri-processing, industry and transport, and as such is arguably the most important driver of economic growth. Load shedding and energy rationing are now the norm. Power shortages have hit productivity, and many companies have been forced to lay off workers. Businesses have shown considerable ingenuity and resilience in order to keep going; revised production methods, for example, have included factories running short shifts overnight when electricity is available. But such solutions are not sustainable. Many small businesses that have become reliant on generators have subsequently suffered because of the fuel crisis. The government expects capacity utilization in the manufacturing sector to decline to 34 per cent in 2019, compared with 48 per cent in the previous year,38 and restaurants, hotels, museums and tourism sites are not able to generate the power needed to operate.
It has been suggested that building and using small-scale power systems based on renewables – including hydro, solar and wind,39 which could increase capacity in a way that also mitigates the risk of dependence on a few traditional power stations. Small-scale solar units are already being installed for homes and businesses to maintain electricity. Government subsidies and tax incentives to promote small renewable energy schemes and solar power systems in off-grid areas would benefit more people more quickly than large projects that may take years to come online. In Nepal, for instance, there has been successful investment in ‘run-of-the-river’ micro-hydropower plants, which generate electricity from river water flow rather than from large dams and reservoirs.40
Domestic investors have called for changes to the licensing regime, and for the liberalization of the transmission and sale of electricity. Controlled power prices make the industry unattractive for investors. The price charged for electricity by Zimbabwe Electricity Supply Authority (ZESA) is not only one of the lowest in the region, and well below the regional average; it also falls short of the cost of production – when it is collected at all. ZESA is owed more than $1.2 billion in unpaid bills, and it owes suppliers US $500 million.41 It is reported that, over the past five years, the Zimbabwe Energy Regulatory Authority (ZERA) has granted licences to over 50 independent power producers, but those projects remain stalled due to low tariffs.42 A more realistic tariff would incentivize independent producers to invest and supply the national grid at competitive rates.
Reliance on foreign loans to finance power production and energy imports to make up the domestic shortfall has exacerbated Zimbabwe’s debt situation. Unpaid ZESA debts to Eskom in South Africa led Eskom to cut its 2019 weekly power supply to Zimbabwe from 450 MW to 50 MW. Eskom agreed to resume weekly transmission of 400 MW in August 2019, after ZESA paid US $10 million of its US $23 million arrears, bringing some relief to consumers in Zimbabwe.43
Rail infrastructure
Zimbabwe is landlocked, meaning that imports and exports have to be transported through second countries, and further capacity is necessary to support emerging economic activity, bulk exports in agriculture and new mining areas. Zimbabwe has built no new railway in the four decades since independence;44 and the existing railway has not been maintained.
The TSP highlights the need for more infrastructure, but little thought appears to have been given as to how the private sector might be persuaded to start shifting bulk by rail rather than by road. New approaches could include setting a legal minimum percentage requirement for certain bulk goods to be moved by rail, or financing through joint ventures. Inviting private rail and road operators to build and maintain the rail infrastructure and roads by structuring public-private partnership concessions could encourage investment on infrastructure development.
33 Guvamombe, I. (2019), ‘Kariba falls from glory to ghost’, The Herald, 17 August 2019, https://www.herald.co.zw/kariba-falls-from-glory-to-ghost/ (accessed 6 Sept. 2019).
34 Mbugua, S. (2019), ‘Two million in Zimbabwe’s capital have no water as city turns off taps’, Climate Home News, 15 July 2019, https://www.climatechangenews.com/2019/07/15/two-million-zimbabwes-capital-no-water-city-turns-off-taps/ (accessed 6 Sept. 2019).
35 AMCOW (2011), Water Supply and Sanitation in Zimbabwe Turning Finance into Services for 2015 and Beyond, AMCOW Country Status Overview, https://www.wsp.org/sites/wsp/files/publications/CSO-Zimbabwe.pdf (accessed 6 Sept. 2019).
37 This project, which includes General Electric and Power China and is funded by the AfDB, is a major Zimbabwe government initiative to develop an alternative major hydropower station. See Global Construction Review (2018), ‘Zambia and Zimbabwe agree in principle to $4.5bn Batoka Gorge hydro scheme’, 20 July 2018, http://www.globalconstructionreview.com/news/zambia-and-zimbabwe-agree-principle-45bn-batoka-go/ (accessed 6 Sept. 2019). Hill, M. and Naidoo, P. (2019), ‘GE, PowerChina Set to Build $4 Billion Zambia-Zimbabwe Plant’, Bloomberg, 20 June 2019, https://www.bloomberg.com/news/articles/2019-06-20/ge-wins-bid-to-build-4-billion-zambia-zimbabwe-hydropower-dam (accessed 6 Sept. 2019).
38 Business Report (2019), ‘Zimbabwe industry capacity utilization to decline amid challenges’, 16 July 2019, https://www.iol.co.za/business-report/international/zimbabwe-industry-capacity-utilization-to-decline-amid-challenges-29310832 (accessed 6 Sept. 2019).
39 Makonese, T. (2019), ‘Quick-fix solutions to Zimbabwe’s huge electricity crisis’, The Conversation, 1 July 2019, https://theconversation.com/quick-fix-solutions-to-zimbabwes-huge-electricity-crisis-118209 (accessed 6 Sept. 2019).
40 Ibid.
41 Bhoroma, V. (2019), ‘Achieving self-sufficiency in Zim power generation’, Zimbabwe Independent, 24 May 2019, https://www.theindependent.co.zw/2019/05/24/achieving-self-sufficiency-in-zim-power-generation/ (accessed 19 Sept. 2019).
42 Mswazie, W. (2019), ‘Zera licenses 51 IPPs’, The Herald, 15 May 2019, https://www.herald.co.zw/zera-licenses-51-ipps/ (accessed 19 Sept. 2019).
43 Ndlovu, R. (2019), ‘South Africa’s Eskom begins 400mw power supply to Zimbabwe’, Bloomberg News via fin24, 9 August 2019, https://www.fin24.com/Economy/eskom-begins-400mw-power-supply-to-zimbabwe-20190809 (accessed 6 Sept. 2019).
44 Zimbabwe Futures 2030 roundtable series.