Zambian businesses pummelled by power cuts
27 November 2015
During an afternoon power cut in the Lusaka township of Bauleni, 52-year-old Stanford Mwanza does what work he can in his carpentry workshop by varnishing a wardrobe. Among Bauleni's 15,000 residents little stirs on streets full of normally active welders, mechanics and tyre menders during business hours, as workers wait for power to return. Elsewhere across the Zambian capital of 1.4 million, and throughout this hydroelectric-dependent country, businesses are suffering after an erratic rainy season from last October to March this year left reservoir water levels too low, resulting in load shedding - or planned power-cuts -  lasting eight to 14 hours a day. Not everyone, however, accepts the government's blaming of rains for the energy crisis that began shortly afterwards, but has worsened since August. Everyone agrees on the outcome, though. "It is a hell of a problem," Mr Mwanza says. "The power went at 10 this morning and now we just have to wait. Normally it takes me three weeks to finish a wardrobe but this one has taken two months." Zambia had one of Africa's fastest growing economies - expanding on average 7% annually over the past five years - driven by mining of its huge copper and cobalt reserves. Then global prices for minerals dropped, coinciding with low rainfall and power cuts, and now Zambia's local currency, the kwacha, is tumbling against the US dollar. This triple whammy has hit everyone from multi-national mining firm Glencore, to mid-size local manufacturers, right down to Bauleni's welders. "If power comes on at night you do not feel like working, then when you wake up there is no power," says Jabulani Keswa, pointing to an unfinished metal window frame. "The owner wanted this yesterday." "If food defrosts we have to throw it away, so we must use a generator, which is expensive," says Bismark Musheke, 22, in a Bauleni butcher's. Many businesses cannot absorb such unplanned costs. A decent-sized generator for a modern office in Lusaka with 20 workers costs up to $14,000 (PS9,000) - the cost has risen due to a weakened kwacha - while needing constant supplies of imported petrol or diesel, again subject to foreign exchange volatility. Power cuts typically add 40% to businesses' costs in emerging economies, the World Bank estimates. As costs of doing business increase, output decreases and firms become less profitable - reducing the government's tax take - says one foreign business advisor in Lusaka. "There is less money to invest in infrastructure, development and debt repayment - it is a vicious cycle." For now, 59-year-old taxi driver Grivin Phiri has not let power cuts reduce output from his small side business run in his neighbourhood of Tenderer East, a larger Lusaka township. "I do not care what time it is - if there is power I will make peanut butter," Mr Phiri says beside the machine in his kitchen producing about 50 jars of peanut butter each week. Mr Phiri says he remembers when rains used to arrive like clockwork each year on 24 October, but "now there is global warming." "The leadership should have prepared for this a long time ago," says Evans Chisokwe, a Bauleni farmer. "Children cannot study at night." More than half Zambia's hydroelectric power usually comes from the Kariba Dam - which has the world's largest man-made reservoir - in the Zambezi river basin between Zambia and Zimbabwe. "On the news we are told it is because water is low at Kariba Dam - that is the only thing we hear," 33-year-old bar manager Elise Matafwali says of the power crisis. Many say is not the first time Zambia has experienced the capriciousness of Mother Nature and the global commodity market. "Zambia's - and sub-Saharan Africa's - energy crisis is caused by a lack of planning, a lack of investment as a result of low tariffs and prevarication by politicians, and poor management of the resource," says Mark Pearson, a Lusaka-based independent regional integration consultant. "We have known there would be an energy shortage for years and have allowed this situation to develop." This leads some to argue it is time the government-controlled Zambia Electricity Supply Corporation (ZESCO) was overhauled, with proper business leaders replacing government-chosen appointees whose mismanagement and lack of contingency planning has resulted in Zambia's worst electricity crisis. "Even if the rains come it will take time for water levels to rise enough," says one ZESCO office manager. "There is talk of full capacity returning by March; perhaps that is people being cautious and it may be earlier." "Zambia sums up why business in Africa is a different ball game," says Niels Bojsen, a Danish partner with Kukula Capital, a Lusaka-based investment company. "Very few economies are in the world's top 10 fasting-growing, and then suddenly are one of the countries with the largest currency devaluation." The main difference, Mr Bojsen says, is when problems hit Europe they appear more controllable. Whereas in Zambia, the fallout means severe power shortages and no one is sure when they will end. The next two to four years will be rough for Zambia's economy but it will recover due to richness in natural resources and great potential for agri-businesses and fish farming, he says, while noting Zambia could emerge stronger if the right lessons are learned and infrastructure established. And Mr Bojsen is not alone in highlighting the advantages for business in Zambia compared with others in the region: peace and security, rule of law, political stability, lack of racial tension, a friendly population and a good climate. Once power returns to Bauleni there is a rush to communal taps - with four local pumping stations starting again - workshops come alive, sparks fly from Mr Keswa's blowtorch, and service picks up in Tiger Woods bar. "Customers do not like warm beer," says bartender Patrick Mbewe, reaching into a now humming, cooling fridge.
"The leadership should have prepared for this a long time ago," says Evans Chisokwe, a Bauleni farmer. "Children cannot study at night." More than half Zambia's hydroelectric power usually comes from the Kariba Dam - which has the world's largest man-made reservoir - in the Zambezi river basin between Zambia and Zimbabwe. "On the news we are told it is because water is low at Kariba Dam - that is the only thing we hear," 33-year-old bar manager Elise Matafwali says of the power crisis. Many say is not the first time Zambia has experienced the capriciousness of Mother Nature and the global commodity market. "Zambia's - and sub-Saharan Africa's - energy crisis is caused by a lack of planning, a lack of investment as a result of low tariffs and prevarication by politicians, and poor management of the resource," says Mark Pearson, a Lusaka-based independent regional integration consultant. "We have known there would be an energy shortage for years and have allowed this situation to develop." This leads some to argue it is time the government-controlled Zambia Electricity Supply Corporation (ZESCO) was overhauled, with proper business leaders replacing government-chosen appointees whose mismanagement and lack of contingency planning has resulted in Zambia's worst electricity crisis. "Even if the rains come it will take time for water levels to rise enough," says one ZESCO office manager. "There is talk of full capacity returning by March; perhaps that is people being cautious and it may be earlier."
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Bad luck or management?