AN era where global economies are progressively transitioning from fossil fuels to renewable energy sources, Zimbabwe's steadfast commitment to coal raises pertinent questions.
This article delves into the economic rationale behind Zimbabwe's sustained investment in coal energy despite the global shift towards renewables.
Additionally, we will explore why Zimbabwe has not fully harnessed its solar energy potential, despite the evident benefits of this renewable resource.
As of January 2024, Shandong Dingneng New Energy Company Ltd. (SDNEC), a major Chinese supplier and manufacturer of steam turbines, announced their intention to explore the feasibility of constructing a “clean coal” power plant in Zimbabwe's Matabeleland North province.
By March 2024, SDNEC representatives were conducting feasibility studies for a 600 MW coal-fired power station, with potential locations, including Hwange.
Concurrently, the company expressed interest in building a 200 MW solar plant and expanding the Hwange power station by two additional units.
In April 2024, SDNEC confirmed plans to expand the Hwange power station with Units 9 and 10, expected to add another 600 MW to its capacity.
This expansion follows the commissioning of Units 7 and 8 in August of the previous year, a critical move to counteract reduced output from the Kariba hydroelectric plant due to low water levels.
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During the first quarter, the Zambezi River Authority (ZRA) maintained a 16 billion cubic metre water allocation to Zimbabwe Electricity
Supply Authority (Zesa) and Zambia’s state-owned power company, Zesco, yielding a combined annual average power production of 428 MW, equally split between the two utilities.
Zimbabwe's electricity demand is projected to surge to approximately 5 177 MW by 2030, driven by intensified activities in mining, manufacturing, agriculture, and increased household consumption.
Currently, demand stands at 2 300 MW, against an average generation of 1 200 MW. Notably, coal accounts for 73,52% of Zimbabwe's national electricity production.
In summary, the 600 MW coal-fired power plant at Hwange (Units 7 & 8) that cost circa US$1,5 billion, equates to US$2,5 million per MW.
In stark contrast, Zambia's 2 000 MW solar project cost US$2 billion, or US$1 million per MW, highlighting the superior cost-effectiveness of solar energy.
Despite the global pivot towards renewable energy, Zimbabwe has been tentative in fully leveraging its solar potential.
The government has announced plans to install floating solar panels on the Kariba Dam in early 2025, with an initial phase of 150 MW and an additional 600 MW from private players.
Similar projects are planned for other reservoirs like the Mutirikwi Dam. However, these initiatives often rely on loans, exacerbating Zimbabwe's indebtedness.
In July 2024, it was disclosed that Zesa, Zimbabwe's power utility, is servicing two substantial loans amounting to US$319 million and approximately US$1 billion from China Exim Bank for the expansion projects at Kariba Hydro Power Station and Hwange Units 7 and 8, respectively.
This information was made public by Zesa’s group financial controller, Eliab Chikwenhere, during a recent Parliamentary Portfolio Committee on Energy session.
Zesa is obligated to disburse US$36 million monthly for Units 7 and 8, with payments mandated to be 100% in USD. Despite attempts to negotiate partial payments in Zimbabwean dollars (ZiG), the financial strain remains significant.
Zesa Holdings’ revenue is insufficient to cover its critical obligations, such as operational costs, loan repayments, procurement of spare parts, and electricity imports.
Monthly revenue collections are approximately US$51 million, which is used to finance these requirements.
Of this amount, US$36 million is allocated to Hwange Power Station Units 7 and 8, while an additional US$25 million is needed for electricity imports.
This total exceeds Zesa's monthly revenue, further compounded by an additional US$5 million required for importing spare parts.
In June 2024 alone, US$19.87 million was spent on importing electrical energy, contributing to a half-year total of US$90,43 million.
This shows the extent to which Zesa’s financial capacity lags.
The latest Annual Public Debt Bulletin (APDB) for 2023 revealed that out of the total US$998 million loan from China Exim Bank, only US$49,7 million had been disbursed.
The APDB also indicated a substantial increase in Zimbabwe's total public and publicly guaranteed (PPG) debt stock, which soared by 19,8% to US$21,2 billion at the end of December 2024, up from US$17,7 billion in September 2023.
Government debt accounts for 93,2% (US$19,7 billion) of this total, with guaranteed debt making up a mere 6,8% (US$1,4 billion).
The total PPG debt stock represents 96,7% of the 2023 national output (GDP), with approximately 97,2% denominated in foreign currency.
External PPG debt constitutes 61,6% (US$13 billion) of the total PPG debt, a slight increase from US$12,7 billion in September 2023. Bilateral creditors hold 47,8% (US$6.2 billion) of this debt, followed by RBZ debts assumed by Treasury (28,1% or US$3,66 billion) and multilateral creditors (24,1% or US$3,14 billion).
In 2023, the Treasury allocated US$57,3 million to external debt servicing: Active portfolios (47,5%), legacy debts (33,9%), and token payments (18,6%).
Zimbabwe also secured a US$400 million Afreximbank loan in February 2023 for trade financing and a US$37,1 million International Fund for Agricultural Development loan in May 2023 for horticultural support.
Global and regional context
The global climate agenda has seen nearly 200 countries commit to reducing coal usage and phasing out fossil fuel subsidies, as evidenced by the historic pledge at the COP26 climate summit.
However, financial support for decarbonisation has been uneven.
Developed nations like the United States, United Kingdom, France, Germany, and the European Union are aiding South Africa's transition from coal, setting a potential precedent for other developing nations.
Zimbabwe, lacking such financial backing, continues to rely on coal. Africa's contribution to global carbon emissions is a mere 4%, rendering the continent's decarbonisation drive relatively inconsequential on a global scale.
Ironically, in 2023, the European Union and Germany, which advocate for Africa's shift from fossil fuels, remain heavily dependent on imported fossil fuels themselves.
Zimbabwe's continued investment in coal energy, despite the global shift towards renewables, is underpinned by economic and infrastructural imperatives.
The nation's immediate energy needs, coupled with a lack of sufficient financial support for renewable projects, make coal a pragmatic choice.
However, the comparative analysis of coal and solar investments underscores the need for a strategic pivot towards more sustainable and cost-effective energy solutions.
The global community's role in supporting such transitions, particularly, in developing nations, remains crucial for a balanced and equitable energy future.
Zimbabwe possesses significant coal deposits, primarily located in the Lower Karoo rocks of the mid-Zambezi Basin and the Save-Limpopo Basin.
There are over 29 known coal localities, estimated to contain more than 26 billion tonnes of coal resources.
Additionally, Zimbabwe has 553 million tonnes of proven coal reserves, ranking 38th globally.
These reserves represent about 0,05% of the world's total coal reserves, amounting to 1 139 471 million tonnes. These substantial coal reserves are crucial feedstock for coal-powered thermal power stations, underscoring coal's value to Zimbabwe's energy sector.
While solar energy presents a sustainable alternative, the land requirements for large-scale solar projects are considerable.
To generate 2 000 MW of solar power, an estimated 10 000 hectares of land would be needed.
This substantial land use poses significant opportunity costs, including the potential loss of agricultural land and other economic activities.
Given Zimbabwe's vast coal reserves and current economic challenges, the nation may find it pragmatic to continue leveraging coal as a primary energy source.
However, a balanced energy strategy incorporating hydro, coal, and solar power is essential for long-term sustainability.
To mitigate the financial strain and reduce reliance on loans, Zimbabwe should explore alternative funding mechanisms, such as public-private partnerships, green bonds, and international grants.
Addressing the nation's high debt levels requires innovative financial solutions and strategic investments in diverse energy sources to ensure a stable and sustainable energy future.
Equity Axis is a financial media firm offering business intelligence, economic and equity research. The article was first published in its latest weekly newsletter, The Axis.
