Dema now strategic . . . For security of power . . . Gets duty exemption for plant fuel imports . . . Helps Zesa to reduce imports to 250MW

Golden Sibanda Senior Business Reporter
THE 100 megawatt Dema diesel power plant has become strategic to security of power supply in Zimbabwe amid revelation Zesa may need to import up to 350 megawatts per given time if the plant stops supplies to the grid. This comes as the State power utility is battling to clear outstanding obligations for power imports from Eskom of South Africa, whom Zesa Holdings owe over $40 million in arrears only and more than $100 million in total.

As Zesa battles to clear the debt and arrears, Eskom has threatened on numerous occasions to switch off Zimbabwe unless the State power utility settled its liabilities, which have exceeded debt levels guaranteed by Government.

Government had guaranteed supplies to Zesa to the tune of R500 million, but the Zimbabwe utility exhausted the secured threshold and on top accumulated arrears, as it struggled to mobilise requisite foreign currency to pay. In recognition of the strategic importance of Dema to the power supply balance in Zimbabwe, amid a crippling shortage of electricity due to limited domestic generation capacity, Government has exempted fuel import duty for the plant.

Sakunda and Zesa have been allowed to get rebates on fuel imported for their respective projects, including Zesa’s ongoing Kariba South 300MW extension, through statutory instrument 126 of 2017, which helps secure supplies. Zesa said its distribution arm, Zimbabwe Electricity Transmission and Distribution Company is getting 100MW from Dema, in line with the power purchase agreement with Sakunda. Dema is located about 40 kilometres outside Harare.

Sakunda Holdings, through its subsidiaries, engages in energy, logistics, and trading businesses in Zimbabwe. Sakunda imports and supplies fuels, such as diesel, petrol, renewable biofuel, and kerosene into Zimbabwe, Malawi, and Zambia; operates and franchises petrol filling stations in Zimbabwe.

It also distributes commercial fuel products for mining, transport, agriculture, and industry sectors; and distributes a range of lubricants and chemicals in Zimbabwe. Zesa, a State power utility, confirmed Sakunda had become a strategic asset to the security of power supply in Zimbabwe, especially amid crippling shortage of foreign currency, which is also seriously affecting electricity imports.

“Without power supplies from Dema, ZETDC imports up to about 350MW during peak demand and supplies from Dema reduce the level of import by 100MW.”

The $250 million Dema Power Plant, set up to provide emergency power in the wake of electricity shortages due to low water levels in Kariba Dam, has capacity to supply 100 megawatts per hour into the national grid at $0,15c/MW.

“The tariff at which Sakunda eventually sells energy to ZETDC is almost halved and this in turn benefits the final consumers of the power,” Zesa said.

Consumers pay 9,83 cents per kilowatt hour, but Zesa has been ratcheting up pressure on Government to be allowed to hike tariffs, as they are sub-economic. It also argues it needs more resources to maintain and upgrade systems.

The low water levels in Lake Kariba, which powers the 750MW Kariba South hydro power plant, caused Government to seek quick solutions to meet emergency power needs, which resulted in the Dema diesel power plant project. The plant is, however, not consistently producing as per design capacity due to lake of water.

Zimbabwe and Zambia, which share Kariba water from the Zambezi River, had their allocations of water for power generation at Lake Kariba reduced by the Zambezi River Authority.

ZRA is responsible for managing the riparian river.

The Dema power plant requires about 12 million litres of diesel annually to power generators and the provision by Government allowing Sakunda to import fuel duty free helps lower the cost of importing fuel and ultimately power to consumers.

The plant has reduced the need for Zimbabwe to rely on imports to secure availability of power, at a time demand at an average 1 400MW outstrips supply of about 1 000MW.

The Reserve Bank, which faces a tough time to equitably share the little available foreign currency to the various priority needs of the country, recently committed to provide about $10 million a week to enable Zesa to clear its arrears.

However, there is no guarantee the foreign currency will always be available in time to meet power import obligations, given the magnitude of shortages and competing, making Dema strategic for consistent of power supply.

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  • Tapfumaneyi

    Dema is strategically crippling Zimbabwe’s meagre forex reserves with expensive diesel imports and lower reduced duty starving taxes available for Treasury. Of what use will be the first new 150MW generator at Kariba South to be inaugurated in December, if Dema diesel power plant can’t then be mothballed immediately and dismantled to save the nation hundreds of millions in far too expensive power generated by Dema?

  • Moe_Scyslack2

    Who are the bigwigs behind this project? How much are they milking Zesa? Once you have those answers then you can understand why ZANU comes up with these exemptions. And the you complain when Faber says America is lucky cause it was colonized by the white man or else it would look like Zimbabwe. We are doomed

  • kutototo

    The herald doing a PR job for the demand looters. We all know the demand project is bleeding the economy through expensive power generation and any attempt to make it economical does not make sense.

  • Kimberly Mangwende

    This Dema diesel power plant is a national disgrace. At a time when the world is moving towards clean and green energy sources, we have a whole govt that commissions a power plant capable of producing well over 30 millions tonnes of carbon dioxide annually. We dont need “golden nonsense” from some writers who are singing for their supper.

  • Mopao General Mbezo

    All these lies about the DEMA project to prop up the ###### and the sakunda handlers. We all know that the plant is bleeding the nation by being exempt from duty and all the other normal costs associated with running business. And we all know that the whole project is environmentally unfriendly and the area around that plant is a ticking health hazard for human beings, flora and fauna..! And we all know how EMA has been shut out of that area to turn a blind eye to the debilitating environmental and health hazard..!

  • Engineer

    The 200 that became a 100…. an article i wrote last year.

    The energy crisis..

    No one will easily forget the energy crisis that hit Zim a few months back, last year to be precise. Electricity would just go baba. Even if it had just come back, it would go back again! If Zim was a one roomed house, then electricity would be a 10-member family – they would just wake up early in the morning and stay outside, whether visitors came or not, and would only go back indoors late at night to catch a nap. Electricity would go at such a rate that even if you wanted to commit suicide, you would count out electrocution as your option during the 16 hrs of any day, save of course for a few strategic areas. Things improved towards the end of the year, and to be honest, we haven’t really had much power cuts since the turn of the year. This is attributed to the imports of power from Zambia, Eskom in SA and Cahora Bassa in Mozambique. Coincidentally, we haven’t had much industry running either, with the Sable electrolysis plant being completely shut down. ZESA Holdings has stepped up efforts to increase power generation capacity through various projects including the Kariba South, Hwange, Gokwe and other small power station projects. Amongst the projects was the much famous Dema Peaking power project close to Wedza, with a potential, at start of project to generate 200MW…

    The Dema Power peaking unit project…

    The Dema Growth Point is located a few kms out of Harare in the Seke Communal lands area. I assume like any other Growth Point like Nemamwa, Murambinda, Bhora, there is a large beerhall, where the community sits and relaxes, having their own fair share of discourse. A few kms from the “Super” plastic bottles being thrown in the midst of hyped conversations, a ZPC project, the Dema Power peaking plant has come to life. The project came out in the press after a few controversial twists of events, with the company that won the tender actually not being awarded the tender, and instead Sakunda in collaboration with Agerkko of Scotland getting the nod. Close to $500 million it was, the total tender value. The whole process was covered at length in articles by the Zimbabwe Independent. In the deal, ZESA will have to pay in excess of 7 million per month for running of the generators to produce power. Not to mention the massive fuel consumption, diesel it is. The deal is valid for three years, and I presume that’s counting from the date the plant was commissioned a few weeks ago. Literally, we are stuck in a deal up to 2019…And this is not bought out equipment, it’s just rented and will be returned back after completion…

    When the 200 became a 100…

    The original plan was to extract 200 MW from the Dema power station. In essence, it would serve as a peaking plant, only coming in during power emergencies. Weird. $500 million for an emergency power generation facility of maximum power 200 MW. That’s like having a Rolls Royce as a standby car when you are driving a Nissan March. We woke up to terrifying news last Friday, when ZESA came out in the press saying of the 200 MW installed capacity, they will be only be able to take 100 MW because they simply cannot afford to pay the other hundred at $0.15 per kW/hr. More weird, that’s like saying I will only take the tyres and car radio from my spare Rolls Royce, and put them on my Nissan March. I don’t understand how people move equipment from all the way up in the North, making noise about delays in installation, and only to say aaaah we will take only half of the installed capacity to use, and we will pay for the remaining half because we have the money!!

    Alternatives that could have been…

    It’s hard to believe how the other resources we have in our possession have not been fully put into use. Zimbabwe enjoys one of the best solar availability ever. The sun itself keeps wondering why we haven’t yet fully made use of it. Let alone, we have a considerable volume of high velocity water from the Victoria Falls which could be rightfully harnessed into electricity generation at a much cheaper cost. Why have we not considered hydro electricity generation from the Victoria Falls – a similar project was done at the turn of the 20th Century at Niagra falls…