Zimbabwe starts paying Zambia debt to enable hydropower project

Zimbabwe’s state utility ZESA said it had started paying a $70 million debt to Zambia, a necessary step before the two nations can embark on a joint 1,600 megawatt hydroelectric plant, which could help relieve a power shortage.

The two southern African countries have started preliminary work on the Batoka power project, estimated to cost $2.5 billion, and expected to be built and operated by a private company for a period of years before transferring ownership to the two states.

Zimbabwe, which currently generates just over 1,000 MW of power or about half of peak demand, has struggled to get funding for new projects to expand capacity, largely due to concerns about President Robert Mugabe’s handling of the economy. The resulting power shortage has paralysed mines and industries.

ZESA Chief Executive Elijah Chifamba told a parliamentary committee hearing the utility had started making payments to Zambia to clear the debt incurred when Zimbabwe sold off assets of a disbanded power firm jointly owned by the two countries to run hydroelectric plants at the Kariba dam.

Chifamba said Zimbabwe will have paid $40 million to the Zambians by the end of March.

“Zambians needed to see first that we were committed to settling that debt and to demonstrate that we are bona fide partners before they could actually enter into the Batoka project,” he said.

“Because we have done so, that has unlocked the project.”

Chifamba said ZESA, which is owed $740 million by non-paying customers, was struggling to raise long-term finance to fund its projects. The company has, however, cleared $100 million in debt for importing power owed to Mozambique’s Hydro Cahorra Bassa.

The utility signed a $400 million deal with Chinese hydropower engineering firm Sinohydro in December to expand its Kariba hydroelectric plant by 300 megawatts.

Zimbabwe is in discussions with Export-Import Bank of China over funding the expansion.

Zimbabwe has licensed several independent power producers, but analysts say it is unlikely to attract significant foreign investment due to Mugabe’s drive to force foreign firms, including mines and banks, to turn over 51 percent ownership stakes to locals under a black economic empowerment law. (Reporting by Nelson Banya; editing by Jane Baird)