Zimbabwe’s industries are grappling with mounting anxieties over the potential shutdown of the Hwange Thermal Power Station, a US$1.4 billion facility financed by Chinese lenders. The state-run power utility, Zesa Holdings, is struggling to meet its debt obligations, raising fears of a crippling power cut that would further exacerbate the country’s already dire economic situation.
The 600-megawatt (MW) Hwange power plant, currently Zimbabwe’s largest power source following a severe drought that crippled the Kariba South Hydroelectric power plant, is vital to the nation’s energy supply. This drought has led to unprecedented power outages, reaching up to 18 hours daily, severely hampering industrial growth and prompting warnings from investors about long-term economic consequences. Industrialists describe the current situation as “the worst ever” wave of blackouts in 44 years.
Christopher Mugaga, chief executive officer of the Zimbabwe National Chamber of Commerce (ZNCC), expressed grave concerns about the looming threat.
In an interview with the Zimbabwe Independent, he highlighted the precarious financial situation: “We have been failing to service Hwange 7 and 8 in terms of debt repayment to the Chinese, which is an issue. Even if units 7 and 8 continue firing on all cylinders, the debt position can make the Chinese switch off until we pay. This is the reason why I say the power situation is dire.”
Mugaga’s warning underscores the urgent need for government intervention. He stressed the necessity of addressing the power crisis in the upcoming 2025 National Budget, stating: “We have to pay the debt.” The ZNCC’s concerns are echoed by the Chamber of Mines of Zimbabwe, which reported losses of up to US$500 million in a single year due to power shortages, forcing the deferral of expansion projects and exploration activities.
The impact of these power cuts extends far beyond the mining sector. Mugaga explained: “If you look at the impact of power shortages, they are having far and wide impacts in terms of literally all sectors of the economy. The impact is quite sad and is being felt because it has significantly increased the costs of manufacturing in this economy.”
Zesa began making US$36 million monthly instalments to Chinese lenders in October last year, following a campaign for significant tariff increases to bolster its debt repayment capacity.
However, the power utility is battling a substantial debt burden, with Eliab Chikwenhere, representing Zesa executive chairman Sydney Gata before the Parliamentary Portfolio Committee on Energy and Power Development, revealing the scale of the problem: “If you look at our foreign obligations, they are close to US$2 billion. These must be serviced and if you compare that to the US$55 million that we are getting per month, then you realise that we have quite a big assignment on our hands.”
He further highlighted the significant monthly cost of servicing the Hwange 7 and 8 debt: “We also have to meet obligations for the operation of units 7 and 8. The requirements are quite phenomenal because on a monthly basis if all units are running at 90%, we need US$36 million per month to service that debt.”
The Zimbabwe Independent sought clarification on the lenders’ legal authority to shut down the power station, but received little concrete information. Energy and Power Development Minister Edgar Moyo redirected questions to Zesa, stating: “I deal with policy issues, not financial matters.”
A Zesa spokesperson, in turn, referred the inquiry back to Minister Moyo and suggested reviewing a presentation made to the Parliamentary Portfolio Committee.
The dire situation is further illuminated by Mugaga’s assessment of the power outages’ impact: “We are looking at power outages on average of more than 60% of working hours…The power challenges are eroding or threatening GDP (gross domestic product) growth by almost 0,8 percentage points. It is certainly dire. That is the way to define it. As I talk to you, if you look at the Kariba power station, we are generating an average of 100MW.
“You can imagine how terrible it is. Units 7 and 8 are generating about 600MW. They are operating well. Unit 5 is literally dysfunctional; it has a capacity of about 150MW. Then Unit 1 to 4 are producing less than 100MW. They are always under repair and failing.”
The consequences extend to employment, with Mugaga estimating: “On average, you will see that we are not looking at less than 45 000 human bodies who could potentially have been employed but either are losing their jobs, or no jobs are created due to the power challenges alone.”
Zimbabwe and China maintain strong diplomatic ties, with China making significant investments in various sectors, including mining and manufacturing, during a period of reduced Western investment. Analysts suggest that the nature of these relations will significantly influence how Chinese lenders handle the debt issue. The potential consequences of a Hwange power station shutdown are severe, threatening to further destabilise an already fragile economy.
