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Power Sector Reforms in Zimbabwe: Implications for Private Sector Participation

By

Dorcas Kayo


EXECUTIVE SUMMARY

Power Sector Reforms are being carried out the world over and Zimbabwe is currently in the initial stages of the implementation process of a major Power Sector Reform program. The Zimbabwe government has decided to go for total unbundling of the power sector both horizontally and vertically. This is a complex and demanding process, both at the planning and implementation stages.

The key driver for the reforms in Zimbabwe is the shortage of investment funds to finance generation, transmission and distribution projects in order to meet the country's power requirements. The country's rate of electrification is very low with only 40% of the population having access to electricity. Government and ZESA have recognised their inability to meet these challenges and have initiated the reform program in order to open up the power sector to private sector investors.

This research looks at the ability of private sector players in the form Independent Power Producing (IPPs)/Independent Power Distributing (IPDs), to mobilise financial and technical resources to set up businesses in the new competitive environment. It also analyses the legal and regulatory environment to see whether it allows the entry of IPPs and IPDs. The research further looks at the legal provisions to see whether they allow for the bulk purchase of electricity from the grid for onward transmission and retailing. The analysis of the legal and regulatory framework is done with regards to both the Electricity Act 1985 and the new Bills, which have not been made into law as yet.

The findings of the study show that there is need to review the legal and regulatory framework in order to remove any constraints to the full participation of the private sector. It is clear that local investors have built skills and knowledge in the installation of small to medium renewable energy projects. The capacities that they have put up have positive socio-economic impacts but they make no significant contribution on the utility's system. 

The findings illustrate that it will prove difficult for IPPs/IPDs to mobilise adequate financial resources given the current economic hardships. The labour market in the country has adequate manpower to meet the present and expanded needs of the power sector. However, the rural electrification projects, undertaken in Zimbabwe indicate that there is need for enhancement of management skills. 

The recommendations encourage emphasize the need for joint partnerships to be formed among the key stakeholders in the power sector in order to facilitate the entry of private sector players. The joint partnerships between government, local investors, external investors, power sector companies, financial institutions and customer interest groups will enable the pooling together of ideas and resources that enable the establishment of a significant number of IPPs/IPDs companies.

This multi-stakeholder approach is being recommended in the light of the difficult economic environment that exists in Zimbabwe. The power sector has been closed to the private sector and the power sector reform programme is creating a new industry and in the initial stages to nurture the development of the sector in terms of facilitating the availability of technical and financial resources and capacity building and institutional strengthening.


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