Zimbabwe is set to receive US $42m in financing from Exim Bank of India to boost electricity supply in the country. The funding will be provided in two phases. Phase one amounting to US $23m will be used to finance, renovate and upgrade the Bulawayo thermal power plant whose initiation power production capacity of 90MW has reduced to 20MW due to the deterioration of two of the plant’s five generating units, which was commissioned in 1957.
Phase two funds worth US $19.5m, will be used to finance the second construction phase of the Deka pumping and water collection station which will facilitate the transport of water from the Zambezi River to the Hwange power station. The loan will be repaid within 20 years, with a grace period of 5 years. The interest rate set is 1.75%. Under the terms of the contract, a commitment fee is charged on the debt. It is equivalent to 0.5% of the nominal value of the loan and will be paid only once.
Power deficit in Zimbabwe
It is projected that the funds will help reduce the current energy deficit of more than 1,000MW. In recent years, Zimbabwe has faced great difficulties in the supply of electricity. Demand is constantly increasing, and is currently estimated at 2,100MW, while the country’s total production capacity is around 663 MW to fill the energy gap that currently stands at over 1,000MW, even though Zimbabwe is forced to import 400MW from South Africa. This leads to the government paying an electricity bill of US $980,000 per week.
Nevertheless, since May 2019, power outages have been regular. Electricity is available on average seven hours a day and sometimes only at late hours. Zimbabwe Electricity Supply Authority (ZESA) explained this by the drying up of the Kariba hydroelectric dam, which until now was the country’s main supplier of electricity.
The dam which had an initial capacity of 1050MW currently produces only 164MW. Until more sustainable solutions are found, the Zimbabwe Electricity Supply Authority (ZESA), the state-owned electricity generation company, announced that it wanted to increase its tariffs by 30%. This measure would enable it to finance the maintenance costs of its networks and to cope with the increase in raw materials used to produce electricity.